How energy coordination on one continent could bring the planet to its knees

It’s a ritual long familiar to observers of American politics: presidential hopefuls with limited international experience travel to foreign lands and deliver speeches designed to showcase their grasp of foreign affairs. Typically, such escapades involve trips to major European capitals or active war zones like Iraq and Afghanistan. New Jersey Governor Chris Christie, however, has broken this mold. Before his recent jaunt to London and into the thickets of American vaccination politics, he chose two surprising destinations for his first trips abroad as a potential Republican candidate. No, not Kabul or Baghdad or even Paris, but Mexico City and Alberta, Canada. And rather than launch into discussions of immigration, terrorism, or the other usual Republican foreign policy topics, he focused on his own top priority: integrating Canada and Mexico into a U.S.-led “North American energy renaissance.”

By accelerating the exploitation of fossil fuels across the continent, reducing governmental oversight of drilling operations in all three countries, and building more cross-border pipelines like the Keystone XL, Christie explained, all three countries would be guaranteed dramatic economic growth. “In North America, we have resources waiting to be tapped,” he assured business leaders in Mexico City. “What is required is the vision to maximize our growth, the political will to unlock our potential, and the understanding that working together on strategic priorities... is the path to a better life.”

At first glance, Christie’s blueprint for his North American energy renaissance seems to be a familiar enough amalgam of common Republican tropes: support for that Keystone XL pipeline slated to bring Canadian tar sands to the U.S. Gulf Coast, along with unbridled energy production everywhere; opposition to excessive governmental regulation; free trade… well, you know the mantra. But don’t be fooled. Something far grander -- and more sinister -- is being proposed. It’s nothing less than a plan to convert Canada and Mexico into energy colonies of the United States, while creating a North American power bloc capable of aggressively taking on Russia, China, and other foreign challengers.

This outlook -- call it North Americanism -- is hardly unique to Christie. It pervades the thinking of top Republican leaders and puts their otherwise almost inexplicably ardent support of Keystone XL in a new light. As most analysts now concede, that pipeline will do little to generate long-term jobs or promote U.S. energy independence. (Much of the tar sands oil it’s designed to carry will be refined in the U.S., but exported elsewhere). In fact, with oil prices plunging globally, it looks ever more like a white elephant of a project, yet it remains the Republican majority’s top legislative priority. The reason: it is the concrete manifestation of Christie-style North American energy integration, and for that reason is considered sacred by Republican proponents of North Americanism. “This is not about sending ‘your oil’ across ‘our land,’” Christie insisted in Calgary. “It’s about maximizing the benefits of North America’s natural resources for everybody.”

While North American energy integration may, in part, appeal to Republicans for the way it would enrich major U.S. oil companies, pipeline firms, and some energy-industry workers -- the “everybody” in Christie’s remarks -- its real allure lies in the way they believe it will buttress the more hawkish and militarized foreign policy that so many in the GOP now favor. By boosting fossil fuel production in North America, Keystone’s backers claim, the U.S. will be less dependent on imports from the Middle East and so in a stronger position to combat Russia, Iran, ISIS, and other foreign challengers.

Authorization for Keystone XL and related energy infrastructure is important “not just for economic development, not just for jobs and growth,” Senator Ted Cruz of Texas declared in January, “but also for the enormous geopolitical advantages that it will present to the United States [by strengthening] our hands against those who would be enemies of America.”

Brace yourself. This combination of fossil fuel optimization and North American solidarity against a potentially hostile world is destined to become the core of the Republican economic and national security platforms in the 2016 presidential election. It will similarly govern action in Congress over the next two years. So, if you want to understand the dynamics of contemporary American politics, it’s crucial to grasp the new Republican vision of an energy-saturated North America.

Exxon’s Neo-Imperial Vision

Republican-style North Americanism is, in fact, an amalgam of two intersecting urges. The first of them involves a quest by U.S.-based giant oil companies to gain greater access to the oil and natural gas reserves of Canada and Mexico; the second, a drive by neoconservatives and national security hawks in Washington to rev up Cold War 2.0, while stepping up combat with both Iran and the Islamic State.

Let’s start with the altered world energy order once dominated by privately owned giants like BP, Chevron, and ExxonMobil -- a.k.a. the international oil companies, or IOCs. For most of the twentieth century, these companies controlled a majority of the world’s oil and gas reserves and so almost completely dominated the global trade in hydrocarbons. In the 1970s and 1980s, however, many of their overseas assets were systematically appropriated by governments in oil-producing countries like Saudi Arabia, Algeria, and Venezuela, and placed under the control of state-owned, national oil companies, or NOCs. In response, the IOCs sought to increase their production from reserves in Canada and the U.S., as well as in Mexico, which has its own state-owned oil company but was facing declining output. This led those big companies to believe that, in the long run, Mexico would be forced to open its doors to greater foreign involvement.

Their strategy proved widely successful in the U.S., where the application of new technologies, including hydro-fracking, horizontal drilling, and deepwater drilling, has led to spectacular increases in oil and gas output. According to the Energy Information Administration of the Department of Energy, U.S. field production of crude oil jumped from five million barrels per day in 2008 to 8.6 million barrels in the third quarter of 2014. Over the same period, the production of natural gas similarly rose from 21.1 to 25.7 trillion cubic feet. The current plunge in oil prices is expected to slow the pace of U.S. drilling, but not prevent further gains.

Stepped-up investment by the big energy companies led to a comparable increase in production from Canada’s tar sands (also called oil sands). According to BP, Canadian crude output climbed from 3.2 million barrels per day in 2008 to nearly 4.0 million barrels by the end of 2013, thanks purely to those tar sands. But the producers of all this added oil have run into a major obstacle to its successful commercialization: there are not enough pipelines to transport this particularly carbon-dense crude to refineries in the United States, where it can be processed into usable petroleum products. Hence, the need for additional pipelines, beginning with Keystone XL. Indeed, with the recent fall in oil prices, Keystone has become even more important, as other modes of transport, including delivery by rail, are far more costly.

Mexico presents a different set of obstacles. Under the Mexican Constitution, all hydrocarbon deposits are the property of the Mexican people and their exploitation is reserved solely for the state-owned company, Petróleos Mexicanos (Pemex). The country’s expropriation of foreign oil assets on March 18, 1937, is considered a pillar of Mexican sovereignty and that day is still celebrated as a national holiday (Día de la Expropiación Petrolera). As a result, the only way the giant oil companies could gain access to Mexico’s vast reserves of oil and gas would be if its leaders were willing to amend existing laws to allow the involvement of foreign firms in the development of these assets.

In response to such obstacles, the major U.S.-based oil companies and their financial backers have developed a strategy to promote North American energy interdependence, while stressing the beneficial value of increased U.S. participation in Canada’s and Mexico’s energy industries and the elimination of barriers to cross-border pipelines and other transnational energy infrastructure.

Although oil company executives have rarely discussed such strategic planning in public, there was an exception. In 2012, before the Council on Foreign Relations, Rex Tillerson, chairman and CEO of ExxonMobil, gave its North American strategy an unusually candid airing. “Canada has a huge resource endowment,” he noted. “The United States has a huge resource endowment; Mexico has a huge resource endowment.” In that light, he suggested that the major U.S. energy firms coordinate the full-scale exploitation of all three countries’ fossil fuels. “[If] we approach energy policy and energy security from a North American perspective, the resource base, the technologies that are available, and the like-minded policies that could be put in place could rapidly achieve that energy security that we have been in quest of for all of my career.”

Canada and the U.S., he pointed out then, were already moving to embrace such “like-minded policies,” but Mexico still had a long way to go. “We’re hopeful,” he added, “that Mexico, as it continues its pathway to reforms around how it manages its own oil and natural gas resources... will open up opportunities for greater partnerships and collaborations [while] bringing technology to bear on the huge resources that Mexico has as well.”

The task, then, was simply to persuade the leaders of Canada, Mexico, and the U.S. to harmonize their energy policies. As Tillerson explained, “It’s my hope that at some point energy security can become a policy issue in our foreign policy discussions with Mexico, Canada, and the United States.” In this Big Oil view of how North America should work lay the foundations for the new Republican strategic vision that Chris Christie, Ted Cruz, and other presidential candidates for 2016 are going to turn into an overarching political mantra.

The New Cold War

Now, imagine a second river of energy exuberance flowing into Big Oil’s strategic vision. This would be the reinvigorated Cold War stance of Republican hawks and neocons. Led by Senator John McCain (now chair of the Senate Armed Services Committee), these advocates for an ever more aggressive foreign/military policy are pushing the idea that a series of foreign adversaries -- Russia, China, Iran, and Islamic terrorists -- are ratcheting up the dangers for this country and that the Obama administration’s response is woefully feeble.

The president’s failure to effectively resist belligerent moves by Russia in the Crimea and Ukraine, McCain argues, has “fed a perception that the United States is weak,” and for figures like Russian President Vladimir Putin, “vacillation invites aggression.” Not only has the president’s claimed policy weakness invited further assaults from Russia in Eurasia, but it has also “emboldened other aggressive actors -- from Chinese nationalists to al-Qaeda terrorists and Iranian theocrats.”

As McCain, other Senate and House war hawks, and their neocon allies see it, there is only one appropriate response to such threats: a vigorous counterattack, involving beefed-up support for NATO, copious arms deliveries to the Ukrainians, and increased defense expenditures at home. “When aggressive rulers or violent fanatics threaten our ideals [and] our interests,” McCain typically asserted last November, the country needs “not good intentions, or strong words, or a grand coalition, [but] the capability, credibility, and global reach of American hard power.”

While “hard power” may be the preferred response of such hawks, most do recognize that the direct use of military force by the United States in Ukraine and a number of other places is unlikely, even under a future Republican administration. Public fatigue over American wars in the Greater Middle East coupled with mounting budget woes and a lack of support from Washington’s allies rules out such moves. This means another powerful form of pressure is needed -- and here’s where energy enters the picture.

As McCain and his allies see it, an energy-based North Americanism could prove to be an effective tool in the new Cold War. Noting that many of Washington’s NATO allies are heavily dependent on Russian natural gas and so -- it is claimed -- vulnerable to future political pressure from Moscow, they are, for instance, promoting the production of ever more natural gas via hydro-fracking to ship off to Europe in the form of liquefied natural gas (LNG). This, they insist, should be one of the country’s top future priorities. “Today, the U.S. has the leverage to liberate our allies from Russia’s stranglehold on the European natural gas market,” McCain and fellow Republican Senator John Hoeven wrote in July. All that is needed, they insist, is to eliminate government obstacles to drilling on federal lands and the approval of the construction of additional LNG export facilities.

The Republican Grand Strategy

This approach has been embraced by other senior Republican figures who see increased North American hydrocarbon output as the ideal response to Russian assertiveness. In other words, the two pillars of a new energy North Americanism -- enhanced collaboration with the big oil companies across the continent and reinvigorated Cold Warism -- are now being folded into a single Republican grand strategy. Nothing will prepare the West better to fight Russia or just about any other hostile power on the planet than the conversion of North America into a bastion of fossil fuel abundance.

This strange, chilling vision of an American (and global) future was succinctly described by former Secretary of State Condoleezza Rice in a remarkable Washington Post op-ed in March 2014. She essentially called for North America to flood the global energy market, causing a plunge in oil prices and bankrupting the Russians. “Putin is playing for the long haul, cleverly exploiting every opening he sees,” she wrote, but “Moscow is not immune from pressure.” Putin and Co. require high oil and gas prices to finance their aggressive activities, “and soon, North America’s bounty of oil and gas will swamp Moscow’s capacity.” By “authorizing the Keystone XL pipeline and championing natural gas exports,” she asserted, Washington would signal “that we intend to do exactly that.”

So now you know: approval of the Keystone XL pipeline isn’t actually about jobs and the economy; it’s about battling Vladimir Putin, the Iranian mullahs, and America’s other adversaries. “One of the ways we fight back, one of the ways we push back is we take control of our own energy destiny,” said Senator Hoeven on January 7th, when introducing legislation to authorize construction of that pipeline.

And that, it turns out, is just the beginning of the “benefits” that North Americanism will supposedly bring. Ultimately, the goals of this strategy are to perpetuate the dominance of fossil fuels in North America’s energy mix and to enlist Canada and Mexico in a U.S.-led drive to ensure the continued dominance of the West in key regions of the world. Stay tuned: you’ll be hearing a lot more about this ambitious strategy as the Republican presidential hopefuls begin making their campaign rounds.

Keep in mind, though, that this is potentially dangerous stuff at every level -- from the urge to ratchet up a conflict with Russia to the desire to produce and consume ever more North American fossil fuels (not exactly a surprising impulse given the Republicans’ heavy reliance on campaign contributions from Big Energy). In the coming months, the Obama administration and Hillary Clinton’s camp will, of course, attempt to counter this drive. Their efforts will, however, be undermined by their sympathy for many of its components. Obama, for instance, has boasted more than once of his success in increasing U.S. oil and gas production, while Clinton has repeatedly called for a more combative foreign policy. Nor has either of them yet come up with a grand strategy as seemingly broad and attractive as Republican North Americanism. If that plan is to be taken on seriously as the dangerous contrivance it is, it evidently will fall to others to do so.

This Republican vision, after all, rests on the desire of giant oil companies to eliminate government regulation and bring the energy industries of Canada and Mexico under their corporate sway. Were this to happen, it would sabotage efforts to curb carbon emissions from fossil fuels in a major way, while undermining the sovereignty of Canada and Mexico. In the process, the natural environment would suffer horribly as regulatory constraints against hazardous drilling practices would be eroded in all three countries. Stepped-up drilling, hydrofracking, and tar sands production would also result in the increased diversion of water to energy production, reducing supplies for farming while increasing the risk that leaking drilling fluids will contaminate drinking water and aquifers.

No less worrisome, the Republican strategy would result in a far more polarized and dangerous international environment, in which hopes for achieving any kind of peace in Ukraine, Syria, or elsewhere would disappear. The urge to convert North America into a unified garrison state under U.S. (energy) command would undoubtedly prompt similar initiatives abroad, with China moving ever closer to Russia and other blocs forming elsewhere.

In addition, those who seek to use energy as a tool of coercion should not be surprised to discover that they are inviting its use by hostile parties -- and in such conflicts the U.S. and its allies would not emerge unscathed. In other words, the shining Republican vision of a North American energy fortress will, in reality, prove to be a nightmare of environmental degradation and global conflict. Unfortunately, this may not be obvious by election season 2016, so watch out.

January 02, 2015

According to reports, one of the first acts of the Republican congress will be to fire Doug Elmendorf, current director of the non-partisan Congressional Budget Office, because he won’t use “dynamic scoring” for his economic projections.

Dynamic scoring is the magical-mystery math Republicans have been pushing since they came up with supply-side “trickle-down” economics.

It’s based on the belief that cutting taxes unleashes economic growth and thereby produces additional government revenue. Supposedly the added revenue more than makes up for what’s lost when Congress hands out the tax cuts.

Dynamic scoring would make it easier to enact tax cuts for the wealthy and corporations, because the tax cuts wouldn’t look as if they increased the budget deficit.

Incoming House Ways and Means Chairman Paul Ryan (R-Wis.) calls it “reality-based scoring,” but it’s actually magical scoring – which is why Elmendorf, as well as all previous CBO directors have rejected it.

Few economic theories have been as thoroughly tested in the real world as supply-side economics, and so notoriously failed.

Ronald Reagan cut the top income tax rate from 70 percent to 28 percent and ended up nearly doubling the national debt. His first budget director, David Stockman, later confessed he dealt with embarrassing questions about future deficits with “magic asterisks” in the budgets submitted to Congress. The Congressional Budget Office didn’t buy them.

George W. Bush inherited a budget surplus from Bill Clinton but then slashed taxes, mostly on the rich. The CBO found that the Bush tax cuts reduced revenues by $3 trillion.

Yet Republicans don’t want to admit supply-side economics is hokum. As a result, they’ve never had much love for the truth-tellers at the Congressional Budget Office.

In 2011, when briefly leading the race for the Republican presidential nomination, Newt Gingrich called the CBO “a reactionary socialist institution which does not believe in economic growth, does not believe in innovation and does not believe in data that has not been internally generated.”

The CBO has continued to be a truth-telling thorn in the Republican’s side.

The budget plan Paul Ryan came up with in 2012 – likely to be a harbinger of what’s to come from the Republican congress – slashed Medicaid, cut taxes on the rich and on corporations, and replaced Medicare with a less well-funded voucher plan.

Ryan claimed these measures would reduce the deficit. The Congressional Budget Office disagreed.

Ryan persevered. His 2013 and 2014 budget proposals were similarly filled with magic asterisks. The CBO still wasn’t impressed.

Yet it’s one thing to cling to magical-mystery thinking when you have only one house of Congress. It’s another when you’re running the whole shebang.

Now that Elmendorf is on the way out, presumably to be replaced by someone willing to tell Ryan and other Republicans what they’d like to hear, the way has been cleared for all the magic they can muster.

In this as in other domains of public policy, Republicans have not shown a particular affinity for facts.

Climate change? It’s not happening, they say. And even if it is happening, humans aren’t responsible. (Almost all scientists studying the issue find it’s occurring and humans are the major cause.)

Widening inequality? Not occurring, they say. Even though the data show otherwise, they claim the measurements are wrong.

Voting fraud? Happening all over the country, they say, which is why voter IDs and other limits on voting are necessary. Even though there’s no evidence to back up their claim (the best evidence shows no more than 31 credible incidents of fraud out of a billion ballots cast), they continue to assert it.

Evolution? Just a theory, they say. Even though all reputable scientists support it, many Republicans at the state level say it shouldn’t be taught without also presenting the view found in the Bible.

Weapons of mass destruction in Iraq? America’s use of torture? The George W. Bush administration and its allies in Congress weren’t overly interested in the facts.

The pattern seems to be: if you don’t like the facts, make them up.

Or have your benefactors finance “think tanks” filled with hired guns who will tell the public what you and your patrons want them to say.

If all else fails, fire your own experts who tell the truth, and replace them with people who will pronounce falsehoods.

There’s one big problem with this strategy, though. Legislation based on lies often causes the public to be harmed.

Not even “truthiness,” as Stephen Colbert once called it, is an adequate substitute for the whole truth.

November 16, 2014

The President blames himself for the Democrat’s big losses Election Day. “We have not been successful in going out there and letting people know what it is that we’re trying to do and why this is the right direction,” he said Sunday.

In other words, he didn’t sufficiently tout the Administration’s accomplishments.

I respectfully disagree.

If you want a single reason for why Democrats lost big on Election Day 2014 it’s this: Median household income continues to drop. This is the first “recovery” in memory when this has happened.

Jobs are coming back but wages aren’t. Every month the job numbers grow but the wage numbers go nowhere.

Most new jobs are in part-time or low-paying positions. They pay less than the jobs lost in the Great Recession.

This wageless recovery has been made all the worse because pay is less predictable than ever. Most Americans don’t know what they’ll be earning next year or even next month. Two-thirds are now living paycheck to paycheck.

So why is this called a “recovery” at all? Because, technically, the economy is growing. But almost all the gains from that growth are going to a small minority at the top.

In fact, 100 percent of the gains have gone to the best-off 10 percent. Ninety-five percent have gone to the top 1 percent.

The stock market has boomed. Corporate profits are through the roof. CEO pay, in the stratosphere. Yet most Americans feel like they’re still in a recession.

And they’re convinced the game is rigged against them.

Fifty years ago, just 29 percent of voters believed government is “run by a few big interests looking out for themselves.” Now, 79 percent think so.

According to Pew, the percentage of Americans who believe most people who want to get ahead can do so through hard work has plummeted 14 points since 2000.

What the President and other Democrats failed to communicate wasn’t their accomplishments. It was their understanding that the economy is failing most Americans and big money is overrunning our democracy.

And they failed to convey their commitment to an economy and a democracy that serve the vast majority rather than a minority at the top.

Some Democrats even ran on not being Barack Obama. That’s no way to win. Americans want someone fighting for them, not running away from the President.

The midterm elections should have been about jobs and wages, and how to reform a system where nearly all the gains go to the top. It was an opportunity for Democrats to shine. Instead, they hid.

Consider that in four “red” states — South Dakota, Arkansas, Alaska, and Nebraska — the same voters who sent Republicans to the Senate voted by wide margins to raise their state’s minimum wage. Democratic candidates in these states barely mentioned the minimum wage.

So what now?

Republicans, soon to be in charge of Congress, will push their same old supply-side, trickle-down, austerity economics.

They’ll want policies that further enrich those who are already rich. That lower taxes on big corporations and deliver trade agreements written in secret by big corporations. That further water down Wall Street regulations so the big banks can become even bigger – too big to fail, or jail, or curtail.

They’ll exploit the public’s prevailing cynicism by delivering just what the cynics expect.

And the Democrats? They have a choice.

They can refill their campaign coffers for 2016 by trying to raise even more money from big corporations, Wall Street, and wealthy individuals. And hold their tongues about the economic slide of the majority, and the drowning of our democracy.

Or they can come out swinging. Not just for a higher minimum wage but also for better schools, paid family and medical leave, and child care for working families.

For resurrecting the Glass-Steagall Act and limiting the size of Wall Street banks.

For saving Social Security by lifting the cap on income subject to payroll taxes.

For rebuilding the nation’s roads, bridges, and ports.

For increasing taxes on corporations with high ratios of CEO pay to the pay of average workers.

And for getting big money out of politics, and thereby saving our democracy.

September 04, 2014

San Diego's Mayor Kevin Faulconer recently signed a deal with Illumina Corporation that was supposedly designed to keep the corporation from jumping ship and landing in another state or jurisdiction. The City of San Diego agreed to rebate $1.5 million in sales and use taxes. In return Illumina promised to keep a number of jobs in San Diego for the term of the agreement. With revenue of just over $1 billion last year, Illumina sells machines that sequence the human genome. The company leases 6 buildings in San Diego totaling over 560,000 sq. ft. and currently has 1500 employees.

Illumina likes to brag about itself as being the "Apple of the genomics industry." It wrote to its shareholders in 2012:

“Illumina is like the Apple of the genomics business. Tools made by the San Diego company are revered by genomics researchers around the world just like millions of consumers love their iPhones and iPads. And Illumina holds its dominant position at an enviable moment in history, as we’re heading into a scientific golden age when human genomes will be sequenced for $1,000 or less.” – Xconomy reporter Luke Timmerman, March 6, 2012

MIT has called it the "World’s Smartest Company" ahead of Tesla Motors, Google and Samsung.

But the deal the City has entered into with Illumina is fishy on several levels. For starters in 2007 GenomeWeb News reported that Illumina signed a fifteen year lease for a new 84,000-square-foot facility currently under construction in San Diego that will enable it to expand its laboratory and office workforce. BioMed Realty Trust, a real estate investment company focused on the life sciences industries, said the new facility will expand an existing 110,000-square-foot facility that Illumina leases at the University Towne Center. Furthermore, Illumina said it had added a 15-year extension to the lease on the existing property. The new facility will allow for the creation of as many as 1,200 new jobs in the San Diego area, according to BioMed.

A fifteen year lease on new and existing buildings signed in 2007? The lease will be up in 2022. It doesn't sound like Illumina has plans to abandon San Diego any time soon. Meanwhile, the Mayor signs a ten year deal that would keep Illumina here till 2024. So for $1.5 million the City gets two more years of Illumina's commitment to San Diego. But wait there's more. The ten year deal is not really a ten year deal. Sound fishy? Read on.

And then there's the shady reports about Illumina being lured away by Memphis, Tennesee or Poway. Poway?? Good God, does the City of San Diego really have to spend $1.5 million to prevent a company from moving to Poway? For those of you who don't know, Poway is located next door to San Diego in San Diego County. It's part of the San Diego Greater Metropolitan area, for Pete's sake. And those mysterious rumors of a move to Memphis. Problem is sources in Memphis don't know anything about it.

Media reports on the "historic" deal—as Council President Todd Gloria described it—suggested that the cities most aggressively seeking favor with Illumina's allure were Poway and Memphis.

This was news to some pretty smart folks in Poway and Memphis.

"That really surprises me, because we've never been in contact with the company," Poway Mayor Don Higginson told Spin. "I checked with our economic-development director, and he said we were never approached by them."

Mark Cafferty, president and CEO of the San Diego Regional Economic Development Corp.— a key organizational player in reaching the Illumina agreement — suggested that Memphis was the big player here in luring Illumina away. Au contraire, said Reid Dulberger, head of economic development for the Memphis area. He'd never heard of such a thing. Asked if the offer suggested by Mark Cafferty was in the ballpark, he replied, "There is no ballpark."

Similarly, representatives of the Memphis Chamber of Commerce and Mayor's office knew nothing about any courtship involving Illumina. It seems like this courtship of Illumina by outside jurisdictions was a fig newton of Mark Cafferty's imagination. After all a CEO of an Economic Development Corporation has to do something to earn his pay. Why not gin up a $1.5 million tax giveaway to some leading corporation which by the way Illumina doesn't really need. They are quite profitable thank you very much.

Local news NBC 7 San Diego reported that "the deal" was announced on July 15, 2014: "Under the 10-year agreement, Illumina will keep 300 middle-class manufacturing jobs in San Diego and receive a tax break up to $1.5 million." First of all the "10-year agreement" implies that those 300 middle class jobs will stay in San Diego for 10 years. Not true. Under terms of the agreement the deal could end much sooner if certain conditions are met. But remember that figure "300 middle class jobs." As we shall show, that is a blatant untruth and misrepresentation of the facts.

Illumina has 1500 employees in San Diego. So retaining 300 middle class jobs is a pittance at best compared to its total San Diego employment. And then remember those 1200 additional jobs that Illumina's expansion at University Towne Center, for which they signed a 15 year lease, allowed for the creation of? That's 2700 jobs in San Diego at present and in the near future, but the Mayor gave away $1.5 million of taxpayers' money to retain a paltry 11% of those jobs. And as we shall show, it's even less than 11%. Esau sold his birthright for a mess of pottage, but Faulconer sold out the taxpayers for a mess of BS.

And then there's the tax rebate deal itself. When scrutinized in the harsh light of day, it has aspects which haven't been made apparent in reports the media has made to the general public. First of all it's not a $1.5 million deal. It's a $1.5 million deal with interest. Witness this exchange on KPBS:

MAUREEN CAVANAUGH: That is up to $1.5 million, is that right?

ALMIS UDRYS: That is correct, $1.5 million with interest as well, over the time while they are claiming the rebate, interest would be accrued as well. In the end it would be over $1.5 million.

So the "tax break up to $1.5 million." Not true either. Illumina will get $1.5 million plus 3% interest, and the payout will be in one lump sum which maximizes the interest.

By the way Almis Udrys also noted that this is the third incentive deal that the city has signed off on this year: "Two of them were craft breweries, Ale Smith and Ballast Point, earlier in the year..."

And then there's the matter of how the $1.5 million is rebated to Illumina. It is rebated out of taxes that Illumina expects to pay in the future above and beyond what they are paying now plus 30%. Illumina is expected to grow, have more sales, pay more sales tax and have even more employees than it has now. So they would go on paying the amount of taxes they paid last year (the benchmark year) plus 30%. Any sales tax above that would be rebated once the $1.5 million is reached. A fine detail is that the 30% only applies to sales tax; use tax rebates would be 100% above those paid in the benchmark year.

So last year Illumina paid about $1.3 million in taxes. Since the rebate amount must sit in city coffers until it totals $1.5 million to be paid out in one lump sum, it will accrue interest until Illumina decides to ask the city for a check. When the full $1.5 million has been received by Illumina (plus interest) or 10 years has elapsed, the deal will be terminated. That means that, if Illumina's sales skyrocket, those 300 jobs it promised to keep in San Diego could evaporate in just a few years not the 10 years the media has reported. And since Illumina is heading into a "scientific golden age" for human genome sequencing, they do expect their sales to skyrocket.

Illumina is adding 1200 jobs almost doubling its workforce. Therefore, it is a reasonable guesstimate that it expects to double its sales. Doubling its sales doubles its sales tax. So next year or the year thereafter Illumina could be paying $2.6 million in taxes which would put it at or near the $1.5 million rebate level. The point is that in just a couple years Illumina could have satisfied conditions for the rebate, taken the $1.5 million and left town except for the fact of those 15 year leases. Oh well, they could leave at least by 2022 so that the 10 year deal to save 300 jobs would be moot.

The rationale is that keeping Illumina here keeps the sales and use taxes coming at least at the present rate plus the employees that it keeps here pay sales tax and other taxes themselves and generate up to three ancillary jobs. Of course, Illumina could move about 90% of its employees to another state immediately. The deal with the city doesn't constrain them from doing that.

Moreover, Alan Gin noted in the same KPBS interview that this sort of tax giveaway "will then impact the level of services that can be provided, spent on infrastructure, and other things." That's $1.5 million plus that won't be spent on parks, libraries, schools, repairing potholes, replacing watermains and improving neighborhoods. Remember K-Faulc's mantra: “There is no such thing as a Democratic or Republican pothole.” Whoops, I guess those Democratic potholes won't get fixed after all.

A Times investigation has examined and tallied thousands of local incentives granted nationwide and has found that states, counties and cities are giving up more than $80 billion each year to companies. The beneficiaries come from virtually every corner of the corporate world, encompassing oil and coal conglomerates, technology and entertainment companies, banks and big-box retail chains.

City Council's Approval a Mere Afterthought

So did Illumina shake down the city and threaten to move elsewhere if they didn't get their spif? Not at all. The tax giveaway was initiated by Kevin Faulconer's team itself with a little help from the folks at San Diego Regional Economic Development Corp. which gave the mayor's office the heads up. It seems that the city undertook to shake itself down.

On July 21 the City Council took up the Economic Development Incentive Agreement (EDIA) with Illumina, Inc., to provide a sales and use tax rebate. On the Council Docket was the following item description:

Authorize the Mayor to enter into an Economic Development Incentive Agreement with Illumina, Inc., to provide a sales and use tax rebate to encourage this company to retain its manufacturing operations and its taxable product sales operations with the City of San Diego.

From an email inquiry to the members of the City Council, I received this reply from Councilmember Lorie Zapf's office:

Yes, the City Council approved the Illumina deal. It came before Council twice; the first time was on July 21, 2014 and all members were present. The second time was also unanimous on August 7, with Councilmembers Kersey and Emerald absent.

However, according to the docket, it was noted that this item was pursuant to Section 99 of the City Charter (10 day published notice, approval by Ordinance and 6 votes required). There was no mention that the item was voted on at all on July 21. And remember the Mayor had already signed the agreement on July 15!

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Illumina would be obligated to retain all of its manufacturing jobs within the City, at any site of its choice, during the term of the EDIA. The term of the EDIA would be the lesser of 10 years or the year that Illumina has generated new additional (above the benchmark) sales and use tax revenues of $1.5 million.

This is interesting for two reasons: (1) Illumina is not required to maintain jobs in the City for ten years as reported in the media but for "the lesser of 10 years or the year that Illumina has generated new additional ... sales and use tax revenues of $1.5 million" and (2) Illumina would not be required to maintain 300 jobs in the City but "all of its manufacturing jobs within the City."

Under the item Community Participation and Public Outreach Efforts it was noted: "None - Confidential municipality-taxpayer negotiations" So the inner workings of the City in this regard are meant to be shrouded in secrecy.

Jay Flatley, CEO of Illumina, signed the Economic Development Incentive Agreement with the City on July 7 long before the City Council "approved" it. The agreement specified the following:

Job Creation and Retention. During the Term of this Agreement, Company shall (i) create or retain all manufacturing jobs existing in the City of San Diego as of the Execution Date; and (ii) make commercially reasonable efforts to create Sales Force jobs, or retain at least the same number of Sales Force Jobs, located in the City of San Diego as of the Execution Date.

The exact number of those manufacturing jobs is not mentioned nor is it specified what a "commercially reasonable effort" is. This would probably not hold water in a court of law.

On July 10, the following document was ready for Mayor Kevin's signature: "AN ORDINANCE OF THE COUNCIL OF THE CITY OF SAN DIEGO AUTHORIZING THE ECONOMIC DEVELOPMENT AGREEMENT WITH ILLUMINA, INC. AND APPROVING CERTAIN RELATED ACTIONS." approved by City Attorney Jan Goldsmith. This document contains a lot of legalese in the form of Whereas this and Whereas that followed by Therefore, Be It Ordained blah, blah, blah. However, one of the Whereases is particularly, well, illuminating:

"WHEREAS, Illumina is committing to create or retain over 100 middle-wage manufacturing job opportunities within San Diego, jobs which are likely to be filled by San Diego residents"

Wait a minute, the legal agreement specifies only 100 manufacturing jobs as opposed to the 300 manufacturing jobs widely reported by the media?! You mean to tell me that this $1.5 million rebate was created to retain 100 jobs in San Diego for what might turn out to be far less than the ten years reported in the media? And that's 100 jobs out of approximately 2700 jobs that Illumina expects shortly to have? Or approximately 1% of its jobs?

The City and its taxpayers have been hoodwinked.

On July 8 David Graham, Deputy Chief Operating Officer, Neighborhood Services, sent a Memorandum to City Council President Todd Gloria with a Direct Docketing Request which consisted of urging the City Council to go ahead and approve the Economic Development Incentive Agreement that Jay Flatley had already signed. It noted: "A proposal for an EDIA would normally be considered by the Council Committee on Economic Development and Intergovernmental Relations (ED&IR) prior to consideration by the full City Council." But Graham wanted it ramrodded through the City Council without further consideration because after all the details had already been worked out and it had already been signed by Flatley. It was awaiting Faulconer's signature as soon as the City Council complied.

The City Council did not give final approval to the Illumina deal until August 7 no doubt because of that Section 99 of the City Charter that required a 10 day waiting period. In any event the deal had already been done, and the City Council's "approval" was after the fact. Faulconer's deal with Illumina was a fait accompli.

Jumping the gun on the City Council's approval, on July 15 Mayor Kevin Faulconer put out a press release:

Agreement with Illumina Inc. will keep hundreds of high wage jobs in the city

San Diego, CA – Today Mayor Kevin L. Faulconer joined Illumina Inc. CEO Jay Flatley to announce an agreement that will keep the medical device company and its good-paying jobs in San Diego. Illumina was recently named "World’s Smartest Company" by the MIT Technology Review, ahead of Tesla Motors, Google and Samsung.

The City will provide a tax rebate in exchange for Illumina retaining approximately 300 middle-class manufacturing jobs in San Diego.

So did the City Council merely ratify a deal on August 7 that had already been consummated on July 15? And the retention of 300 middle-class manufacturing jobs? What about the 1500 other higher paying R&D and sales jobs that Illumina now provides and the 1200 new jobs it will add according to Biomed? Illumina has in no way committed itself to maintaining those jobs in San Diego. And as it turns out, the 300 manufacturing jobs had magically diminished to 100 manufacturing jobs when the ink was put to paper.

Nothing about this deal is what it seems. The $1.5 million rebate. It's actually $1.5 million plus 3% which the city will pay out in one lump sum. That 3% really adds up year after year. The 10 year time period? It's really the lesser of 10 years or whenever Illumina can claim the rebate. Illumina moving to Poway or Memphis? It turns out neither Poway nor Memphis had ever heard of that. Illumina seeking a tax advantage not to move out of San Diego? Illumina CEO Flatley didn't approach the City. The Mayor's office in the person of Almis Udrys, Kevin Faulconer's Director of Government Affairs, approached him. The City Council's approval of the deal? The City Council's "approval" came after the deal had already been signed by Faulconer and Flatley. Did anyone on the City Council do their homework or due diligence to check this deal out? The first clue, Sherlock, was that Illumina had signed 15 year leases on all or some of its properties. Doesn't seem that they were going anywhere any time soon.

The Illumina deal sets a disastrous precedent for other corporations to seek out their own tax deals. It is just the harbinger of things to come. With the San Diego Regional Economic Development Corporation giving the "heads up", and Almis Udrys as liason, Mayor Faulconer is only too able and willing to do tax giveaways to San Diego corporations. Hey, we're open for business. C'mon down! The City Council's approval will just be an afterthought. Someone from the Mayor's office, like David Graham, will send the Council a Memorandum telling them to hurry up and ratify the Mayor's deals.

That's money that won't be used for parks, libraries, schools and infrastructure repairs like replacing 100 year old water mains and filling potholes. The Republicans' goal is to defund government and give the money to corporations. As their spokeman, Grover Norquist, has said, "We want to make government so small that it can be drowned in the bathtub." That's the Republican mantra. Corporate welfare of the type given to Illumina Corporation is a handy means for defunding government and transferring the money to the private sector.

Peter D. Enrich, a professor at Northeastern University School of Law has written:

The proliferation of state and local tax incentives designed to attract or retain business investment ... has proven troublingly resistant to reform. Despite a growing recognition ... that the competition over business incentives is at best a zero-sum game... the size of the incentive packages offered for large corporate facilities reaches ever-new heights ... The only consistent winners are the large businesses that can pit one jurisdiction against another for reduced tax burdens, while other taxpayers and citizens pay the cost in constrained government services and higher taxes ... The states and localities face a classic collective action problem: when they each pursue their individual self-interest, they all end up worse off.

CEO Jay Flatley was not going to move Illumina Corporation out of San Diego. He needs to stay close to the world class research universities in San Diego and the relationships developed therewith. His executives and highly paid employees don't want to trade San Diego's climate, the best in the nation, for Rich Perry's Texas hell hole. His kids want to continue surfing at the beaches. They all love their houses in La Jolla and Rancho Santa Fe. The wives want to continue shopping at University Towne Center. To uproot all these executives and highly paid employees would be unthinkable. Why then, does Mayor Faulconer think he has to offer tax rebate incentives to get major corporations to stay here? And to bum rush the City Council who obviously had not done their homework and due diligence on this issue. The best policy is to have faith and believe in San Diego as a place that major corporations would want to locate and, once located, would want to stay. The urge to offer tax incentives to corporations must be resisted. A Democratic Mayor would have resisted.

The Illumina rebate is just the beginning, the advent of a new era in San Diego politics, the signal that more is yet to come. The Mayor is sending a message to business. C'mon y'all, line up for your free tax giveaways. Mayor Kevin is open for business!

November 24, 2013

Having failed to defeat the Affordable Care Act in Congress, to beat it back in the last election, to repeal it despite more than eighty votes in the House, to stop it in the federal courts, to get enough votes in the Supreme Court to overrule it, and to gut it with outright extortion (closing the government and threatening to default on the nation’s debts unless it was repealed), Republicans are now down to their last ploy.

They are hell-bent on destroying the Affordable Care Act in Americans’ minds.

A document circulating among House Republicans (reported by the New York Times) instructs them to repeat the following themes and stories continuously: “Because of Obamacare, I Lost My Insurance.” “Obamacare Increases Health Care Costs.” “The Exchanges May Not Be Secure, Putting Personal Information at Risk.”

Every Republican in Washington has been programmed to use the word “disaster” whenever mentioning the Act, always refer to it as Obamacare, and demand its repeal.

Republican wordsmiths know they can count on Fox News and right-wing yell radio to amplify and intensify all of this in continuous loops of elaboration and outrage, repeated so often as to infect peoples’ minds like purulent pustules.

The idea is to make the Act so detestable it becomes the fearsome centerpiece of the midterm elections of 2014 — putting enough Democrats on the defensive they join in seeking its repeal or at least in amending it in ways that gut it (such as allowing insurers to sell whatever policies they want as long as they want, or delaying it further).

Admittedly, the President provided Republicans ammunition by botching the Act’s roll-out. Why wasn’t HealthCare.gov up and running smoothly October 1? Partly because the Administration didn’t anticipate that almost every Republican governor would refuse to set up a state exchange, thereby loading even more responsibility on an already over-worked and underfunded Department of Health and Human Services.

Why didn’t Obama’s advisors anticipate that some policies would be cancelled (after all, the Act sets higher standards than many policies offered) and therefore his “you can keep their old insurance” promise would become a target? Likely because they knew all policies were “grandfathered” for a year, didn’t anticipate how many insurers would cancel right away, and understood that only 5 percent of policyholders received insurance independent of an employer anyway.

But there’s really no good excuse. The White House should have anticipated the Republican attack machine.

The real problem is now. The President and other Democrats aren’t meeting the Republican barrage with three larger truths that show the pettiness of the attack:

The wreck of private insurance. Ours has been the only healthcare system in the world designed to avoid sick people. For-profit insurers have spent billions finding and marketing their policies to healthy people – young adults, people at low risk of expensive diseases, groups of professionals – while rejecting people with preexisting conditions, otherwise debilitated, or at high risk of heart disease, diabetes, and cancer. And have routinely dropped coverage of policy holders who become seriously sick or disabled. What else would you expect from corporations seeking to maximize profits?

But the social consequences have been devastating. We have ended up with the most expensive healthcare system in the world (finding and marketing to healthy people is expensive, corporate executives are expensive, profits adequate to satisfy shareholders are expensive), combined with the worst health outcomes of all rich countries — highest rates of infant mortality, shortest life spans, largest portions of populations never seeing a doctor and receiving no preventive care, most expensive uses of emergency rooms.

We could not and cannot continue with this travesty of a healthcare system.

The Affordable Care Act is a modest solution. It still relies on private insurers — merely setting minimum standards and “exchanges” where customers can compare policies, requiring insurers to take people with preexisting conditions and not abandon those who get seriously sick, and helping low-income people afford coverage.

A single-payer system would have been preferable. Most other rich countries do it this way. It could have been grafted on to Social Security and Medicare, paid for through payroll taxes, expanded to lower-income families through Medicaid. It would have been simple and efficient. (It’s no coincidence that the Act’s Medicaid expansion has been easy and rapid in states that chose to accept it.)

But Republicans were dead set against this. They wouldn’t even abide a “public option” to buy into something resembling Medicare. In the end, they wouldn’t even go along with the Affordable Care Act, which was based on Republican ideas in the first place. (From Richard Nixon’s healthcare plan through the musings of the Heritage Foundation, Republicans for years urged that everything be kept in the hands of private insurers but the government set minimum standards, create state-based insurance exchanges, and require everyone to sign up).

The moral imperative. Even a clunky compromise like the ACA between a national system of health insurance and a for-profit insurance market depends, fundamentally, on a social compact in which those who are healthier and richer are willing to help those who are sicker and poorer. Such a social compact defines a society.

The other day I heard a young man say he’d rather pay a penalty than buy health insurance under the Act because, in his words, “why should I pay for the sick and the old?” The answer is he has a responsibility to do so, as a member the same society they inhabit.

The Act also depends on richer people paying higher taxes to finance health insurance for lower-income people. Starting this year, a healthcare surtax of 3.8 percent is applied to capital gains and dividend income of individuals earning more than $200,000 and a nine-tenths of 1 percent healthcare tax to wages over $200,000 or couples over $250,000. Together, the two taxes will raise an estimated $317.7 billion over 10 years, according to the Joint Committee on Taxation.

Here again, the justification is plain: We are becoming a vastly unequal society in which most of the economic gains are going to the top. It’s only just that those with higher incomes bear some responsibility for maintaining the health of Americans who are less fortunate.

This is a profoundly moral argument about who we are and what we owe each other as Americans. But Democrats have failed to make it, perhaps because they’re reluctant to admit that the Act involves any redistribution at all.

Redistribution has become so unfashionable it’s easier to say everyone comes out ahead. And everyone does come out ahead in the long term: Even the best-off will gain from a healthier and more productive workforce, and will save money from preventive care that reduces the number of destitute people using emergency rooms when they become seriously ill.

But there would be no reason to reform and extend health insurance to begin with if we did not have moral obligations to one another as members of the same society.

The initial problems with the website and the President’s ill-advised remark about everyone being able to keep their old policies are real. But they’re trifling compared to the wreckage of the current system, the modest but important step toward reform embodied in the Act, and the moral imperative at the core of the Act and of our society.

The Republicans have created a tempest out of trivialities. It is incumbent on Democrats — from the President on down — to show Americans the larger picture, and do so again and again.

They say the biggest problem is the size of government and the budget deficit.

In fact our biggest problem is the decline of the middle class and increasing ranks of the poor, while almost all the economic gains go to the top.

The Labor Department reported Tuesday that only 148,000 jobs were created in September — way down from the average of 207,000 new jobs a month in the first quarter of the year.

Many Americans have stopped looking for work. The official unemployment rate of 7.2 percent reflects only those who are still looking. If the same percentage of Americans were in the workforce today as when Barack Obama took office, today’s unemployment rate would be 10.8 percent.

Meanwhile, 95 percent of the economic gains since the recovery began in 2009 have gone to the top 1 percent. The real median household income continues to drop, and the number of Americans in poverty continues to rise.

So what’s Washington doing about this? Nothing. Instead, it’s back to debating how to cut the federal budget deficit.

The deficit shouldn’t even be an issue because it’s now almost down to the same share of the economy as it’s averaged over the last thirty years.

The triumph of right-wing Republicanism extends further. Failure to reach a budget agreement will restart the so-called “sequester” — automatic, across-the-board spending cuts that were passed in 2011 as a result of Congress’s last failure to agree on a budget.

These automatic cuts get tighter and tighter, year by year — squeezing almost everything the federal government does except for Social Security and Medicare. While about half the cuts come out of the defense budget, much of the rest come out of programs designed to help Americans in need: extended unemployment benefits; supplemental nutrition for women, infants and children; educational funding for schools in poor communities; Head Start; special education for students with learning disabilities; child-care subsidies for working families; heating assistance for poor families. The list goes on.

The biggest debate in Washington over the next few months will be whether to whack the federal budget deficit by cutting future entitlement spending and closing some tax loopholes, or go back to the sequester. Some choice.

The real triumph of the right has come in shaping the national conversation around the size of government and the budget deficit – thereby diverting attention from what’s really going on: the increasing concentration of the nation’s income and wealth at the very top, while most Americans fall further and further behind.

Continuing cuts in the budget deficit – through the sequester or a deficit agreement — will only worsen this by reducing total demand for goods and services and by eliminating programs that hard-pressed Americans depend on.

The President and Democrats should re-frame the national conversation around widening inequality. They could start by demanding an increase in the minimum wage and a larger Earned Income Tax Credit. (The President doesn’t’ even have to wait for Congress to act. He can raise the minimum wage for government contractors through an executive order.)

Framing the central issue around jobs and inequality would make clear why it’s necessary to raise taxes on the wealthy and close tax loopholes (such as “carried interest,” which enables hedge-fund and private-equity managers to treat their taxable income as capital gains).

It would explain why we need to invest more in education – including early-childhood as well as affordable higher education.

This framework would even make the Affordable Care Act more understandable – as a means for helping working families whose jobs are paying less or disappearing altogether, and therefore in constant danger of losing health insurance.

The central issue of our time is the reality of widening inequality of income and wealth. Everything else — the government shutdown, the fight over the debt ceiling, the continuing negotiations over the budget deficit — is a dangerous distraction. The Right’s success in generating this distraction is its greatest, and most insidious, triumph.

October 19, 2013

Republicans have agreed to fund the federal government through January 15 and extend the government’s ability to borrow (raise the debt ceiling) through Feb. 7. The two sides have committed themselves to negotiate a long-term budget plan by mid-December.

Regardless of what happens in the upcoming budget negotiations, it seems doubtful House Republicans will try to prevent the debt ceiling from being raised next February. Saner heads in the GOP will be able to point to the debacle Tea Partiers created this time around – the public’s anger, directed mostly at Republicans; upset among business leaders and Wall Street executives, who bankroll much of the GOP; and the sharply negative reaction of stock and bond markets, where the American middle class parks whatever savings it has.

The saner Republicans will also be able to point out that President Obama means it when he says he won’t ever negotiate over the debt ceiling. The fact that he negotiated over it in 2011 is now irrelevant.

On the other hand, there’s a significant chance of another government shutdown in January. By then we’ll be well into the gravitational pull of the 2014 midterm elections. Every House member is up for reelection – mostly from safe (often gerrymandered) districts in which their major competitors are likely to be primary opponents from the Tea Party right.

These opponents will be challenging them to show what they’ve done to sandbag Obamacare and shrink the size of government. The President and the Democrats have made it clear they’ll protect Obamacare at all costs. Which means the real action between now and January 15 will be over the federal budget. The threat of another government shutdown is the only major bargaining leverage House Republicans possess in order to get what they consider “meaningful” concessions.

We know the parameters of the upcoming budget debate because we’ve been there before. The House already has its version — the budget Paul Ryan bequeathed to them. This includes major cuts in Medicare (turning it into a voucher) and Social Security (privatizing much of it), and substantial cuts in domestic programs ranging from education and infrastructure to help for poorer Americans. Republicans also have some bargaining leverage in the sequester, which continues to indiscriminately choke government spending.

The Senate has its own version of a budget, which, by contrast, cuts corporate welfare, reduces defense spending, and raises revenues by closing tax loopholes for the wealthy.

Here, I fear, is where the President is likely to cave.

He’s already put on the table a way to reduce future Social Security payments by altering the way cost-of-living adjustments are made – using the so-called “chained” consumer price index, which assumes that when prices rise people economize by switching to cheaper alternatives. This makes no sense for seniors, who already spend a disproportionate share of their income on prescription drugs, home healthcare, and medical devices – the prices of which have been rising faster than inflation. Besides, Social Security isn’t responsible for our budget deficits. Quite the opposite: For years its surpluses have been used to fund everything else the government does.

The President has also suggested “means-testing” Medicare – that is, providing less of it to higher-income seniors. This might be sensible. The danger is it becomes the start of a slippery slope that eventually turns Medicare into another type of Medicaid, a program perceived to be for the poor and therefore vulnerable to budget cuts.

But why even suggest cutting Medicare at all, when the program isn’t responsible for the large budget deficits projected a decade or more from now? Medicare itself is enormously efficient; its administrative costs are far lower than commercial health insurance.

The real problem is the rising costs of healthcare, coupled with the aging of the post-war boomers. The best way to deal with the former – short of a single-payer system — is to use Medicare’s bargaining power over providers to move them from “fee-for-services,” in which providers have every incentive to do more tests and procedures, to “payments-for-healthy-outcomes,” where providers would have every incentive to keep people healthy. (The best way to deal with the latter – the aging of the American population – is to allow more young immigrants into America.)

More generally, the President has been too eager to accept the argument that the major economic problem facing the nation is large budget deficits – when, in point of fact, the deficit has been shrinking as a share of the national economy. The only reason it’s expected to increase in future years is, again, rising healthcare costs.

Our real economic problem continues to be a dearth of good jobs along with widening inequality. Cutting the budget deficit may make both worse, by reducing total demand for goods and services and eliminating programs that lower-income Americans depend on.

The President has now scored a significant victory over extremist Republicans. But the fight will continue. He mustn’t relinquish ground during the upcoming cease-fire.

October 13, 2013

Now is the time to lance the boil of Republican extremism once and for all.

Since Barack Obama became president, the extremists who have taken over the Republican Party have escalated their demands every time he’s caved, using the entire government of the United States as their bargaining chit.

In 2010 he agreed to extend all of the Bush tax cuts through the end of 2012. Were they satisfied? Of course not.

In the summer of 2011, goaded by an influx of Tea Partiers, they demanded huge spending cuts in return for raising the debt ceiling. In response, the President offered an overly-generous $4 trillion “Grand Bargain,” including cuts in Social Security and Medicare and whopping cuts in domestic spending (bringing it to its lowest level as a share of gross domestic product in over half a century).

Were Republicans content? No. When they demanded more, Obama agreed to a Super Committee to find bigger cuts, and if the Super Committee failed, a “sequester” that would automatically and indiscriminately slice everything in the federal budget except Social Security and Medicare.

Not even Obama’s re-election put a damper on their increasing demands. By the end of 2012, they insisted that the Bush tax cuts be permanently extended or the nation would go over the “fiscal cliff.” Once again, Obama caved, agreeing to permanently extend the Bush tax cuts for incomes up to $400,000.

Early this year, after the sequester went into effect, Republicans demanded even bigger spending cuts. Obama offered more cuts in Medicare and a “chained CPI” to reduce Social Security payments, in exchange for Republican concessions on taxes.

Refusing the offer, and seemingly delirious with their power to hold the nation hostage, they demanded that the Affordable Care Act be repealed as a condition for funding the government and again raising the debt ceiling.

This time, though, Obama didn’t cave — at least, not yet.

The government is shuttered and the nation is on the verge of defaulting on its debts. But public opinion has turned sharply against the Republican Party. And the GOP’s corporate and Wall Street backers are threatening to de-fund it.

Suddenly the Republicans are acting like the school-yard bully who terrorized the playground but finally got punched in the face. They’re in shock. They’re humiliated. They’re trying to come up with ways of saving face.

With bloodied nose, House Republicans are running home. They’ve abruptly turned negotiations over to their Senate colleagues.

And just as suddenly, their demand to repeal or delay the Affordable Care Act has vanished. (An email from the group Tea Party Express says: “Are you like us wondering where the fight against Obamacare went?”) At a lunch meeting in the Capitol, Senator John McCain asked a roomful of Republican senators if they still believed it was possible to reverse parts of the program. According to someone briefed on the meeting, no one raised a hand — not even Ted Cruz.

It appears that negotiations over the federal budget deficit are about to begin once again, and presumably Senate Republicans will insist that Obama and the Democrats give way on taxes and spending in exchange for reopening the government and raising the debt ceiling for at least another year.

But keeping the government running and paying the nation’s bills should never have been bargaining chits in the first place, and the President and Democrats shouldn’t begin to negotiate over future budgets until they’re taken off the table.

The question is how thoroughly President Obama has learned that extortionist demands escalate if you give in to them.

October 08, 2013

"I would dispel the rumor that is going around that you hear on every newscast, that if we don’t raise the debt ceiling, we will default on our debt," says Sen.Tom Coburn, R-Okla. “We won’t. We’ll continue to pay our interest.”

This is crazy talk. While the Treasury Department could prioritize interest payments after October 17 – the day the Treasury Department says it no longer has legal authority to pay the nation’s debts – and not pay Social Security and Medicare, this would buy a few days at most.

Meanwhile, interest rates will soar, stock prices will plummet, the global economy will begin spiraling downward, and millions of Americans wouldn’t receive their Social Security and Medicare.

So why are Republicans talking like this? Because they want to sound as if they’re willing to blow up the economy if they don’t get their way. A crazy person with a bomb is much scarier than someone holding a bomb who looks and acts reasonable. Sounding crazy is part of the Republican bargaining strategy.

But the President and the Democrats must not give in.

If we get to October 17th and the Republicans are still holding the nation hostage, the President has only one option: He must ignore the debt ceiling and order the Treasury to continue to pay all the nation’s bills.

He should rely on Section 4 of the Fourteenth Amendment to the Constitution, which says the “validity of the public debt of the United States, authorized by law … shall not be questioned.” The debt itself is clearly “authorized by law” because it’s the direct result of laws authorizing the U.S. to spend and to tax. The showdown over the debt ceiling is over payment of the debt, not the legality of the debt itself. Arguably, what the Constitution requires trumps any law governing the debt-ceiling.

If Republicans disagree, let them try to impeach the President. Their polls are already dropping. The latest Washington Post-ABC poll shows 70 percent of the public disapproving of their tactics (65 percent disapproved before the shutdown), while the President’s disapproval remains at 51 percent. An attempted impeachment would reveal to the public just how crazy Republicans have become.

October 07, 2013

"You are here because now is the single best time we have to defund Obamacare. This is a fight we can win." SENATOR TED CRUZ, speaking in August to a Heritage Action gathering in Dallas

WASHINGTON — Shortly after President Obama started his second term, a loose-knit coalition of conservative activists led by former Attorney General Edwin Meese III gathered in the capital to plot strategy. Their push to repeal Mr. Obama’s health care law was going nowhere, and they desperately needed a new plan.

Out of that session, held one morning in a location the members insist on keeping secret, came a little-noticed “blueprint to defunding Obamacare,” signed by Mr. Meese and leaders of more than three dozen conservative groups.

It articulated a take-no-prisoners legislative strategy that had long percolated in conservative circles: that Republicans could derail the health care overhaul if conservative lawmakers were willing to push fellow Republicans — including their cautious leaders — into cutting off financing for the entire federal government.

“We felt very strongly at the start of this year that the House needed to use the power of the purse,” said one coalition member, Michael A. Needham, who runs Heritage Action for America, the political arm of the Heritage Foundation. “At least at Heritage Action, we felt very strongly from the start that this was a fight that we were going to pick.”

Last week the country witnessed the fallout from that strategy: a standoff that has shuttered much of the federal bureaucracy and unsettled the nation.

To many Americans, the shutdown came out of nowhere. But interviews with a wide array of conservatives show that the confrontation that precipitated the crisis was the outgrowth of a long-running effort to undo the law, the Affordable Care Act, since its passage in 2010 — waged by a galaxy of conservative groups with more money, organized tactics and interconnections than is commonly known.

With polls showing Americans deeply divided over the law, conservatives believe that the public is behind them. Although the law’s opponents say that shutting down the government was not their objective, the activists anticipated that a shutdown could occur — and worked with members of the Tea Party caucus in Congress who were excited about drawing a red line against a law they despise.

A defunding “tool kit” created in early September included talking points for the question, “What happens when you shut down the government and you are blamed for it?” The suggested answer was the one House Republicans give today: “We are simply calling to fund the entire government except for the Affordable Care Act/Obamacare.”

The current budget brinkmanship is just the latest development in a well-financed, broad-based assault on the health law, Mr. Obama’s signature legislative initiative. Groups like Tea Party Patriots, Americans for Prosperity and FreedomWorks are all immersed in the fight, as is Club for Growth, a business-backed nonprofit organization. Some, like Generation Opportunity and Young Americans for Liberty, both aimed at young adults, are upstarts. Heritage Action is new, too, founded in 2010 to advance the policy prescriptions of its sister group, the Heritage Foundation.

The billionaire Koch brothers, Charles and David, have been deeply involved with financing the overall effort. A group linked to the Kochs, Freedom Partners Chamber of Commerce, disbursed more than $200 million last year to nonprofit organizations involved in the fight. Included was $5 million to Generation Opportunity, which created a buzz last month with an Internet advertisement showing a menacing Uncle Sam figure popping up between a woman’s legs during a gynecological exam.

The groups have also sought to pressure vulnerable Republican members of Congress with scorecards keeping track of their health care votes; have burned faux “Obamacare cards” on college campuses; and have distributed scripts for phone calls to Congressional offices, sample letters to editors and Twitter and Facebook offerings for followers to present as their own.

One sample Twitter offering — “Obamacare is a train wreck” — is a common refrain for Speaker John A. Boehner.

As the defunding movement picked up steam among outside advocates, Republicans who sounded tepid became targets. The Senate Conservatives Fund, a political action committee dedicated to “electing true conservatives,” ran radio advertisements against three Republican incumbents.

Heritage Action ran critical Internet advertisements in the districts of 100 Republican lawmakers who had failed to sign a letter by a North Carolina freshman, Representative Mark Meadows, urging Mr. Boehner to take up the defunding cause.

“They’ve been hugely influential,” said David Wasserman, who tracks House races for the nonpartisan Cook Political Report. “When else in our history has a freshman member of Congress from North Carolina been able to round up a gang of 80 that’s essentially ground the government to a halt?”

On Capitol Hill, the advocates found willing partners in Tea Party conservatives, who have repeatedly threatened to shut down the government if they do not get their way on spending issues. This time they said they were so alarmed by the health law that they were willing to risk a shutdown over it. (“This is exactly what the public wants,” Representative Michele Bachmann of Minnesota, founder of the House Tea Party Caucus, said on the eve of the shutdown.)

Despite Mrs. Bachmann’s comments, not all of the groups have been on board with the defunding campaign. Some, like the Koch-financed Americans for Prosperity, which spent $5.5 million on health care television advertisements over the past three months, are more focused on sowing public doubts about the law. But all have a common goal, which is to cripple a measure that Senator Ted Cruz, a Texas Republican and leader of the defunding effort, has likened to a horror movie.

“We view this as a long-term effort,” said Tim Phillips, the president of Americans for Prosperity. He said his group expected to spend “tens of millions” of dollars on a “multifront effort” that includes working to prevent states from expanding Medicaid under the law. The group’s goal is not to defund the law.

October 01, 2013

As a child I was bullied by bigger boys who threatened to beat me up if I didn’t give them what they wanted. But every time I gave in to their demands their subsequent demands grew larger. First they wanted the change in my pocket. Next it was the dessert in my lunchbox. Then my new Davy Crockett cap. Then the softball and bat I got for my birthday.

Finally I stopped giving in. When the bullies began roughing me up on the playground some older boys came to my rescue and threatened my tormenters with black eyes if they ever touched me again. That ended their extortion racket.

What’s happening in Washington these days may seem far removed from my boyhood memories, but Washington is really just another children’s playground. Its current bullies are right-wing Republicans, now threatening that if they don’t get their way they’ll close down the government and cause the nation to default on its debts.

“The American people don’t want a government shutdown, and they don’t want Obamacare,” House Republican leaders said in a statement over the weekend. “We will do our job and send this bill over, and then it’s up to the Senate to pass it and stop a government showdown.”

Really? The American people don’t want Obamacare as much as I didn’t want my softball and bat.

Okay, maybe not quite as much. But the only settled way we know what the American people want is through the democratic process. And the Affordable Care Act (Obamacare) is the law of the land. A majority of the House and Senate voted for it, the President signed it into law, its constitutionality has been upheld by the Supreme Court, and a majority of Americans reelected the President after an election battle in which the Affordable Care Act was a central issue.

Moreover, we don’t repeal laws in this country by holding hostage the entire government of the United States.

The bullies are a faction inside the Republican Party – extremists who are threatening more reasonable Republicans with primary challenges if they don’t go along.

And where are the Tea Party extremists getting their dough? From even bigger bullies – a handful of hugely wealthy Americans who are sinking hundreds of millions of dollars into this extortion racket.

They include David and Charles Koch (and their front group, “Americans for Prosperity’); Peter Thiel, leverage-buyout specialist John Childs, investor Howie Rich, Stephen Jackson of the Stevens Group, and executives of JPMorgan and Goldman Sachs, (all behind the “Club for Growth”); and Crow Holdings’ Harlan Crow, shipping magnate Richard Uihlein, and investment banker Foster Friess; executives of MetLife and Philip Morris, and foundations controlled by the Scaife family (all bankrolling “FreedomWorks.”)

Their game plan is to not just to take over the Republican Party. It’s to take over America. The showdown over the budget and the debt ceiling is a prelude to 2016, when they plan to run Texas Senator Ted Cruz for President. (Cruz, if you haven’t noticed, is busily establishing his creds as the biggest flamer in Washington – orchestrating not only the current extortion but also the purge of reasonable Republicans from the GOP.)

Obama and the Democrats must not give in. They shouldn’t even negotiate with extortionists. As I learned the hard way, giving in to bullies just encourages them to escalate their demands.

The President began negotiations with the Republican bullies in 2011 when they first threatened to default on the nation’s debt if they didn’t get the spending cuts they wanted. He negotiated again at the end of 2012 when they threatened to go over the fiscal cliff and take the rest of the nation with them if they didn’t get the budget they wanted. Now they want to repeal a law they detest. If we give in again, what’s next? A coup d’etat?

August 04, 2013

Job-growth is sputtering. So why, exactly, do regressive Republicans continue to say “no" to every idea for boosting it — even last week’s almost absurdly modest proposal by President Obama to combine corporate tax cuts with increased spending on roads and other public works?

It can’t be because Republicans don’t know what’s happening. The data are indisputable. July’s job growth of 162,000 jobs was the weakest in four months. The average workweek was the shortest in six months. The Bureau of Labor Statistics has also lowered its estimates of hiring during May and June.

It can’t be Republicans really believe further spending cuts will help. They’ve seen the effects of austerity economics on Europe. They know the study they relied on by Carmen Reinhart and Kenneth Rogoff has been debunked. They’re no longer even trying to make the case for austerity.

It could be they just want to continue opposing anything Obama proposes, but that’s beginning to seem like a stretch. Republican leaders and aspiring 2016 presidential candidates are warning against being the “party of ‘no.’" Public support for the GOP continues to plummet.

The real answer, I think, is they and their patrons want unemployment to remain high and job-growth to sputter. Why? Three reasons:

First, high unemployment keeps wages down. Workers who are worried about losing their jobs settle for whatever they can get — which is why hourly earnings keep dropping. The median wage is now 4 percent lower than it was at the start of the recovery. Low wages help boost corporate profits, thereby keeping the regressives’ corporate sponsors happy.

Third, high unemployment keeps most Americans economically fearful and financially insecure. This sets them up to believe regressive lies — that their biggest worry should be that “big government" will tax away the little they have and give it to “undeserving" minorities; that they should support low taxes on corporations and wealthy “job creators;" and that new immigrants threaten their jobs.

It’s important for Obama and the Democrats to recognize this cynical strategy for what it is, and help the rest of America to see it.

And to counter with three basic truths:

First, the real job creators are consumers, and if average people don’t have jobs or good wages this economy can’t have a vigorous recovery.

Second, the rich would do better with a smaller share of a rapidly-growing economy than their current big share of an economy that’s hardly moving.

Third, therefore everyone would benefit from higher taxes on the wealthy to finance public investments in roads, bridges, public transit, better schools, affordable higher education, and healthcare — all of which will help the middle class and the poor, and generate more and better jobs.

July 14, 2013

Have you heard about “libertarian populism” yet? If not, you will. It will surely be touted all over the airwaves and the opinion pages by the same kind of people who assured you, a few years ago, that Representative Paul Ryan was the very model of a Serious, Honest Conservative. So let me make a helpful public service announcement: It’s bunk.

Some background: These are tough times for members of the conservative intelligentsia — those denizens of think tanks and opinion pages who dream of Republicans once again becoming “the party of ideas.” (Whether they ever were that party is another question.)

For a while, they thought they had found their wonk hero in the person of Mr. Ryan. But the famous Ryan plan turned out to be crude smoke and mirrors, and I suspect that even conservatives privately realize that its author is more huckster than visionary. So what’s the next big idea?

Enter libertarian populism. The idea here is that there exists a pool of disaffected working-class white voters who failed to turn out last year but can be mobilized again with the right kind of conservative economic program — and that this remobilization can restore the Republican Party’s electoral fortunes.

You can see why many on the right find this idea appealing. It suggests that Republicans can regain their former glory without changing much of anything — no need to reach out to nonwhite voters, no need to reconsider their economic ideology. You might also think that this sounds too good to be true — and you’d be right. The notion of libertarian populism is delusional on at least two levels.

First, the notion that white mobilization is all it takes rests heavily on claims by the political analyst Sean Trende that Mitt Romney fell short last year largely because of “missing white voters” — millions of “downscale, rural, Northern whites” who failed to show up at the polls. Conservatives opposed to any major shifts in the G.O.P. position — and, in particular, opponents of immigration reform — quickly seized on Mr. Trende’s analysis as proof that no fundamental change is needed, just better messaging.

But serious political scientists like Alan Abramowitz and Ruy Teixeira have now weighed in and concluded that the missing-white-voter story is a myth. Yes, turnout among white voters was lower in 2012 than in 2008; so was turnout among nonwhite voters. Mr. Trende’s analysis basically imagines a world in which white turnout rebounds to 2008 levels but nonwhite turnout doesn’t, and it’s hard to see why that makes sense.

Suppose, however, that we put this debunking on one side and grant that Republicans could do better if they could inspire more enthusiasm among “downscale” whites. What can the party offer that might inspire such enthusiasm?

Well, as far as anyone can tell, at this point libertarian populism — as illustrated, for example, by the policy pronouncements of Senator Rand Paul — consists of advocating the same old policies, while insisting that they’re really good for the working class. Actually, they aren’t. But, in any case, it’s hard to imagine that proclaiming, yet again, the virtues of sound money and low marginal tax rates will change anyone’s mind.

Moreover, if you look at what the modern Republican Party actually stands for in practice, it’s clearly inimical to the interests of those downscale whites the party can supposedly win back. Neither a flat tax nor a return to the gold standard are actually on the table; but cuts in unemployment benefits, food stamps and Medicaid are. (To the extent that there was any substance to the Ryan plan, it mainly involved savage cuts in aid to the poor.) And while many nonwhite Americans depend on these safety-net programs, so do many less-well-off whites — the very voters libertarian populism is supposed to reach.

Specifically, more than 60 percent of those benefiting from unemployment insurance are white. Slightly less than half of food stamp beneficiaries are white, but in swing states the proportion is much higher. For example, in Ohio, 65 percent of households receiving food stamps are white. Nationally, 42 percent of Medicaid recipients are non-Hispanic whites, but, in Ohio, the number is 61 percent.

So when Republicans engineer sharp cuts in unemployment benefits, block the expansion of Medicaid and seek deep cuts in food stamp funding — all of which they have, in fact, done — they may be disproportionately hurting Those People; but they are also inflicting a lot of harm on the struggling Northern white families they are supposedly going to mobilize.

Which brings us back to why libertarian populism is, as I said, bunk. You could, I suppose, argue that destroying the safety net is a libertarian act — maybe freedom’s just another word for nothing left to lose. But populist it isn’t.

July 13, 2013

A basic economic principle is government ought to tax what we want to discourage, and not tax what we want to encourage.

For example, if we want less carbon dioxide in the atmosphere, we should tax carbon polluters. On the other hand, if we want more students from lower-income families to be able to afford college, we shouldn’t put a tax on student loans.

Earlier this year the Republican-led House passed a bill pegging student-loan interest rates to the yield on the 10-year Treasury note, plus 2.5 percentage points. “I have very little tolerance for people who tell me that they graduate with $200,000 of debt or even $80,000 of debt because there’s no reason for that,” Rep. Virginia Foxx (R-NC), the co-sponsor of the GOP bill, said.

Republicans estimate this will bring in around $3.7 billion of extra revenue, which will help pay down the federal debt.

In other words, it’s a tax — and one that hits lower-income students and their families. Which is why several leading Democrats, including Senate Majority Whip Dick Durbin, oppose it. “Let’s make sure we don’t charge so much in interest that the students are actually paying a tax to reduce the deficit,” he argues.

(Republicans claim the President’s plan is almost the same as their own. Not true. Obama’s plan would lead to lower rates, limit repayments to 10 percent of a borrower’s discretionary income, and fix the rate for the life of the loan.)

Meanwhile, a growing number of Republicans have signed a pledge – sponsored by the multi-billionaire Koch brothers — to oppose any climate-change legislation that might raise government revenues by taxing polluters.

Officially known as the “No Climate Tax Pledge,” its signers promise to “oppose any legislation relating to climate change that includes a net increase in government revenue.”

By now 411 current office holders nationwide have signed on, including the entire GOP House leadership, a third of the members of the House as a whole, and a quarter of U.S. senators.

The New Yorker’s Jane Mayer reports that two successive efforts to control greenhouse-gas emissions by implementing cap-and-trade energy bills have died in the Senate, the latter specifically targeted by A.F.P.’s pledge

Why are Republicans willing to impose a tax on students and not on polluters? Don’t look for high principle.

Big private banks stand to make a bundle on student loans if rates on government loans are raised. They have thrown their money at both parties but been particularly generous to the GOP. A 2012 report by the nonpartisan Public Campaign shows that since 2000, the student loan industry has spent more than $50 million on lobbying.

Meanwhile, the Koch brothers – whose companies are among America’s 20 worst air-polluters –have long been intent on blocking a carbon tax or a cap-and-trade system. And they, too, have been donating generously to Republicans to do their bidding.

We should be taxing polluters and not taxing students. The GOP has it backwards because its patrons want it that way.

David Stockman, an integral part of the Reagan administration, has produced a great book, “The Great Deformation,” in which he blames Republican Presidents starting with Richard Nixon for the sad state of the US economy, but he saves his worst invective for Ronald Reagan and George W Bush for their abandonment of sound economic policy and their wild “deficits don’t matter” spending.

He indicts the Reagan administration for a needless, wasteful military build-up and the creation of what he calls the “warfare state.” He also condemns the fiscal profligacy of Republican economic policy for condoning any and all tax cuts for any reason whatsoever, for coddling Wall Street and for decades of money printing and market rigging by the Federal Reserve.

In an article in the New York Times Stockman said: “The destruction of fiscal rectitude under Ronald Reagan — one reason I resigned as his budget chief in 1985 — was the greatest of his many dramatic acts. It created a template for the Republicans’ utter abandonment of … balanced-budget policies … and allowed George W. Bush to dive into the deep end, bankrupting the nation through two misbegotten and unfinanced wars, a giant expansion of Medicare and a tax-cutting spree for the wealthy that turned K Street lobbyists into the de facto office of national tax policy. In effect, the G.O.P. embraced Keynesianism — for the wealthy.”

We find it amusing that the greatest critic of capitalism since Karl Marx turns out to be a libertarian, but Stockman’s criticism is more biting and less generous than is Marx’s, and The Great Deformation is a veritable manifesto, a jeremiad just as detailed and well researched as was Das Kapital.

In both cases their prescriptions are a lot less profound than their descriptions. Marx thought that workers should be paid according to the labor theory of value and capitalists were parasites; Stockman rejects crony capitalism and wants to return to “pure capitalism” where markets are the final arbiters of all values, the false assumption being that unregulated free markets invariably deliver benefits for all.

The reasonably sound social-economic balance prevalent from post WWII through the mid 1970s was one of shared progress, solidarity, and sacrifices in the interests of all – solidified by corporate stakeholder priorities of Employees first, Customers second, Shareholders third.

Then came the dismantling of this stakeholder triad with the Republican “ trickle down, starving the state” paradigm of the last 30 years – successfully polarizing our society into the Haves and Have Nots under the inflated corporate stakeholder regime of Shareholders first, Customers second, Employees third. Stockman acknowledges (30 years after the fact) that Reagan left a legacy of permanent “massive deficit finance” and the financial gospel that “deficits don’t matter”.

A recent Pew Research Report, “A Rise in Wealth for the Wealthy; Declines for the Lower 93%” details how the wealthy have made huge economic gains since the financial crisis of 2008 while the great bulk of the American people have languished. Wealth, as opposed to income, refers to the value of a household’s assets minus the value of household liabilities, or the value of what it owns minus the value of what it owes. (John’s grandfather said, “Pay what you owe; then you will know what you own.”)

It includes the value of nonfinancial assets owned, such as equity in one’s own home and a motor vehicle, as well as the value of financial assets such as bank accounts, savings bonds, stocks, bonds and securities.

When it comes to income the situation is largely the same. The rich made huge gains while most Americans saw inflation adjusted declines in their incomes. Economists Saez and Piketty showed that the vast majority’s average adjusted gross income was $29,840 in 2010. That was down $127 from 2009 and down $4,842 from 2000. The average income of the vast majority of taxpayers in 2010 was just a smidgen more than the $29,448 average way back in 1966.

At the top, the super-rich saw their 2010 average income grow by $4.2 million over 2009 to $23.8 million. Compared to 1966 their income was up on average by $18.7 million per taxpayer. The top 1% have received 121% of the income gains since 2009.

In the early 70s, top executives earned 40 times the income of an average-paid employee. Today, that ratio is over 300 times. American life has dramatically changed as the once honored “middle-class democracy” of shared progress fades into the sunset – worsened by a somber future of structurally slower job growth and static if not declining wages as the economic pie becomes smaller.

One of the facets of Reaganomics that Stockman reserves for his strongest ridicule is the Laffer curve. The Laffer curve attempted to show that the more taxes were cut, the more economic activity would ensue and hence more government revenues would be generated.

History has shown this not to be the case. Reagan’s huge increase in defense spending and tax cuts for the rich saw the national debt increase $1.9 trillion or 186%! Annual 4% deficits were triple those of prior presidencies and GDP growth rates were nothing to rave about. (see Frank’s detailed analysis of taxes, spending and debt under various Presidents here.)

In addition to condemning the economic policies of all Republican Presidents from Nixon to George W Bush, Stockman calls out Fed Chairmen Alan Greenspan and Ben Bernanke for flooding the economy with hot money which has produced nothing but bubbles that have eventually burst.

The floodgates were opened when Congress rejected the 1930s era Glass-Steagall Act which put a firewall between commercial and investment banks thus paving the way for the unlimited growth of derivatives, credit default swaps, collateralized debt obligations and the financialized, casino economy in general.

These problems have not been sufficiently addressed by the Dodd-Frank Wall Street Reform and Consumer Protection Act signed by Obama because the banking lobby managed to dilute any reform with teeth in it. For this reason Stockman and a lot of others are predicting another major crash when the stock market bubble pops.

Reagan, Bush Jr. and Greenspan Inc. believed deregulated capitalism and cheap money would lead to prosperity and ample jobs for everyone. Over the last 33 years, Republican Congressional majorities have given tax cuts to the rich and corporations (including subsidies to the world’s most profitable corporations which are already paying negligible effective taxes) when there were low deficits and even more insanely in high deficit times.

This has escalated the predations of capitalism with its powerful tendency to concentrate wealth and income to the already wealthy and to export and automate jobs away for maximum shareholder returns. This wealth concentration has intensified othernasty economic problems we continue to suffer from today. It has given rise to almost unlimited economic power for a few and has effectively reduced the money circulation in the REAL Economy, thus perpetuating stagnant job and economic levels.

Just as Marx predicted, there has been a concentration and centralization of wealth. Family farms have given away to corporate, industrial farms. Mom and Pop stores have given away to Wal-Marts. Jobs in the real economy have given away to jobs in Wall Street, in the prodigal warfare economy and in the medical-industrial complex.

Stockman gives the lie to the often espoused theory that Democrats are Big Spenders and Republicans are small government conservatives by pointing out that “it was the second Bush who took Reaganomics to its logical extreme, demolishing Republican fiscal rectitude once and for all in a fury of ‘guns and butter,’ and tax giveaways, too.

Federal outlays in the final budget of George W Bush soared to 25% of GDP. [Ed. note: By comparison, under Clinton, Federal outlays were 18% of GDP in F/Y 2000 vs. an average of 22.5% under Reagan.] That was a post-World War II record by a long shot, but even that figure did not assay the full extent of the Bush fiscal debacle.” The Republican ideology of ‘small government’ was honored more in the breach than in the observance. Federal spending as a percentage of GDP under Republican presidencies since FDR has exceeded that of Democratic presidencies.

As Stockman makes clear, Republican administration policies represented Keynesianism for the rich while the Fed “junk” policies of cheap, hot money did nothing to benefit the real economy and the lives of average Americans. The Fed has put itself in the role of producing a prosperity economy by means of perpetual bubble ‘blow-ups’.

As noted earlier, the “mixed economy” of the 50s, 60s and 70s and the unwritten social contract among business, labor and government of shared benefits from economic growth has also been in a process of ‘blow-up’ – as inequality penetrates every pore of American society.

According to The Great Deformation, “Nevertheless, when the false narrative of macroeconomic prosperity is stripped away, what remains is the real story of the Reagan era: how the nation’s conservative party fostered the great fiscal breakdown now upon the land, and got away with it by pretending that the money printers it appointed to the Fed were fostering honest prosperity.

“The whole narrative was wrong. Reaching back to the time of Reagan, it can be shown that fiscal discipline was destroyed first by the ‘neo-cons’ who coddled the warfare state in pursuit of national security illusions; and then by the ‘tax-cons’ who dismantled Uncle Sam’s revenue base in the name of supply-side doctrine; and finally by the ‘just-cons’, the rank-and-file Republicans who fulminated against Big Government but cowered continuously before the assembled lobbies of the welfare state.”

Next time: The bail-out of AIG and the purported ‘contagion’ risk to the real economy

April 12, 2013

John Boehner, Speaker of the House, revealed why it’s politically naive for the President to offer up cuts in Social Security in the hope of getting Republicans to close some tax loopholes for the rich. “If the President believes these modest entitlement savings are needed to help shore up these programs, there’s no reason they should be held hostage for more tax hikes,” Boehner said in a statement released Friday.

House Majority Leader Eric Cantor agreed. He said on CNBC he didn’t understand “why we just don’t see the White House come forward and do the things that we agree on” such as cutting Social Security, without additional tax increases.

Get it? The Republican leadership is already salivating over the President’s proposed Social Security cut. They’ve been wanting to cut Social Security for years.

But they won’t agree to close tax loopholes for the rich.

They’re already characterizing the President’s plan as a way to “save” Social Security — even though the cuts would undermine it — and they’re embracing it as an act of “bi-partisanship.”“I’m encouraged by any steps that President Obama is taking to save and preserve Social Security,” cooed Texas Republican firebrand Ted Cruz. “I think it should be a bipartisan priority to strengthen Social Security and Medicare to preserve the benefits for existing seniors.”

Oh, please. Social Security hasn’t contributed to the budget deficit. And it’s solvent for the next two decades. (If we want to insure its solvency beyond that, the best fix is to lift the cap on income subject to Social Security taxes – now $113,700.)

And the day Ted Cruz agrees to raise taxes on the wealthy or even close a tax loophole will be when Texas freezes over.

The President is scheduled to dine with a dozen Senate Republicans Wednesday night. Among those attending will be John Boozman of Arkansas, who has already praised Obama for “starting to throw things on the table,” like the Social Security cuts.

That’s exactly the problem. The President throws things on the table before the Republicans have even sat down for dinner.

The President’s predilection for negotiating with himself is not new. But his willingness to do it with Social Security, the government’s most popular program — which Democrats have protected from Republican assaults for almost eighty years — doesn’t bode well.

The President desperately wants a “grand bargain” on the deficit. Republicans know he does. Watch your wallets.

March 02, 2013

Imagine a plot to undermine the government of the United States, to destroy much of its capacity to do the public’s business, and to sow distrust among the population.

Imagine further that the plotters infiltrate Congress and state governments, reshape their districts to give them disproportionate influence in Washington, and use the media to spread big lies about the government.

Finally, imagine they not only paralyze the government but are on the verge of dismantling pieces of it.

Far-fetched? Perhaps. But take a look at what’s been happening in Washington and many state capitals since Tea Party fanatics gained effective control of the Republican Party, and you’d be forgiven if you see parallels.

Tea Party Republicans are crowing about the “sequestration” cuts beginning today (Friday). “This will be the first significant tea party victory in that we got what we set out to do in changing Washington,” says Rep. Tim Huelskamp (Kan.), a Tea Partier who was first elected in 2010.

Sequestration is only the start. What they set out to do was not simply change Washington but eviscerate the U.S. government — “drown it in the bathtub,” in the words of their guru Grover Norquist – slashing Social Security and Medicare, ending worker protections we’ve had since the 1930s, eroding civil rights and voting rights, terminating programs that have helped the poor for generations, and making it impossible for the government to invest in our future.

Sequestration grew out of a strategy hatched soon after they took over the House in 2011, to achieve their goals by holding hostage the full faith and credit of the United States – notwithstanding the Constitution’s instruction that the public debt of the United States “not be questioned.”

To avoid default on the public debt, the White House and House Republicans agreed to harsh and arbitrary “sequestered” spending cuts if they couldn’t come up with a more reasonable deal in the interim. But the Tea Partiers had no intention of agreeing to anything more reasonable. They knew the only way to dismember the federal government was through large spending cuts without tax increases.

Nor do they seem to mind the higher unemployment their strategy will almost certainly bring about. Sequestration combined with January’s fiscal cliff deal is expected to slow economic growth by 1.5 percentage points this year – dangerous for an economy now crawling at about 2 percent. It will be even worse if the Tea Partiers refuse to extend the government’s spending authority, which expires March 27.

A conspiracy theorist might think they welcome more joblessness because they want Americans to be even more fearful and angry. Tea Partiers use fear and anger in their war against the government – blaming the anemic recovery on government deficits and the government’s size, and selling a poisonous snake-oil of austerity economics and trickle-down economics as the remedy.

They likewise use the disruption and paralysis they’ve sown in Washington to persuade Americans government is necessarily dysfunctional, and politics inherently bad. Their continuing showdowns and standoffs are, in this sense, part of the plot.

What is the President’s response? He still wants a so-called “grand bargain” of “balanced” spending cuts (including cuts in the projected growth of Social Security and Medicare) combined with tax increases on the wealthy. So far, though, he has agreed to a gross imbalance — $1.5 trillion in cuts to Republicans’ $600 billion in tax increases on the rich.

The President apparently believes Republicans are serious about deficit reduction, when in fact the Tea Partiers now running the GOP are serious only about dismembering the government.

And he seems to accept that the budget deficit is the largest economic problem facing the nation, when in reality the largest problem is continuing high unemployment (some 20 million Americans unemployed or under-employed), declining real wages, and widening inequality. Deficit reduction now or in the near-term will only make these worse.

Besides, the deficit is now down to about 5 percent of GDP – where it was when Bill Clinton took office. It is projected to mushroom in later years mainly because healthcare costs are expected to rise faster than the economy is expected to grow, and the American population is aging. These trends have little or nothing to do with government programs. In fact, Medicare is far more efficient than private health insurance.

I suggest the President forget about a “grand bargain.” In fact, he should stop talking about the budget deficit and start talking about jobs and wages, and widening inequality – as he did in the campaign. And he should give up all hope of making a deal with the Tea Partiers who now run the Republican Party.

Instead, the President should let the public see the Tea Partiers for who they are — a small, radical minority intent on dismantling the government of the United States. As long as they are allowed to dictate the terms of public debate they will continue to hold the rest of us hostage to their extremism.

February 25, 2013

The White House apparently believes the best way to strengthen its hand in the upcoming “sequester” showdown with Republicans is to tell Americans how awful the spending cuts will be, and blame Republicans for them.

It won’t work. These tactical messages are getting in the way of the larger truth, which the President must hammer home: The Republicans’ austerity economics and trickle-down economics are dangerous, bald-faced lies.

Yes, the pending spending cuts will hurt. But even if some Americans begin to feel the pain when the cuts go into effect Friday, most won’t feel it for weeks or months, if ever.

Half are cuts in the military, which will have a huge impact on jobs (the military is America’s only major jobs program), but the cuts will be felt mainly in states with large numbers of military contractors, and then only as those contractors shed employees.

The other half are cuts in domestic discretionary spending, which will largely affect lower-income Americans. There will be sharp reductions in federal aid to poor schools, nutrition assistance, housing assistance, and the like. But here again, most Americans won’t see these cuts or feel them.

Moreover, the blame game can be played both ways, and Republicans are adept at slinging mud. When it comes to high-visibility consequences of the spending cuts — such as a sudden dearth of air-traffic controllers — Republicans will dodge blame by happily giving Obama authority to shift spending and find the cuts himself, thereby making the White House appear even more culpable.

Besides, there’s no end to this. After Friday’s sequester comes the showdown over continuing funding of the government beyond March 27. Then another fight over the debt ceiling.

The White House must directly rebut the two big lies that fuel the Republican assault – and that have fueled it since the showdown over the debt ceiling in the summer of 2011.

The first big lie is austerity economics – the claim that the budget deficit is the nation’s biggest economic problem now, responsible for the anemic recovery.

Wrong. The problem is too few jobs, lousy wages, and slow growth. Cutting the budget deficit anytime soon makes the problem worse because it reduces overall demand. As a result, the economy will slow or fall into recession – which enlarges the deficit in proportion. You want proof? Look at what austerity economics has done to Europe.

The second big lie is trickle-down economics – the claim that we get more jobs and growth if corporations and the rich have more money because they’re the job creators, and job growth would be hurt if their taxes were hiked.

Wrong. The real job creators are the broad middle class and everyone who aspires to join it. Their purchases keep economy going.

As inequality continues to widen, and income and wealth become ever more concentrated at the top, the rest don’t have the purchasing power they need to boost the economy. That’s the underlying reason why the recovery continues to be so anemic.

These two lies – austerity economics and trickle-down economics – are being told over and over by Republicans and their mouthpieces on Fox News, yell radio, and the editorial pages of the Wall Street Journal. They are wrong and there are dangerous.

Yet unless they are rebutted clearly and forcefully, the nation will continue to careen from crisis to crisis, showdown to showdown.

And we will have almost no chance of reversing the larger challenge of widening inequality.

President Obama has the bully pulpit. Americans trust him more than they do congressional Republicans. But he is letting micro-tactics get in the way of the larger truth. And he’s blurring his message with other messages – about gun control, immigration, and the environment. All are important, to be sure. But none has half a chance unless Americans understand how they’re being duped on the really big story.

January 26, 2013

Soon after President Obama’s second inaugural address, John Boehner said the White House would try “to annihilate the Republican Party” and “shove us into the dustbin of history.”

Actually, the GOP is doing a pretty good job annihilating itself. As Louisiana Governor Bobby Jindal put it, Republicans need to “stop being the stupid party.”

The GOP crackup was probably inevitable. Inconsistencies and tensions within the GOP have been growing for years – ever since Ronald Reagan put together the coalition that became the modern Republican Party.

All President Obama has done is finally found ways to exploit these inconsistencies.

Republican libertarians have never got along with social conservatives, who want to impose their own morality on everyone else.

Shrink-the-government fanatics in the GOP have never seen eye-to-eye with deficit hawks, who don’t mind raising taxes as long as the extra revenues help reduce the size of the deficit.

The GOP’s big business and Wall Street wing has never been comfortable with the nativists and racists in the Party who want to exclude immigrants and prevent minorities from getting ahead.

And right-wing populists have never got along with big business and Wall Street, which love government as long as it gives them subsidies, tax benefits, and bailouts.

Ronald Reagan papered over these differences with a happy anti-big-government nationalism. His patriotic imagery inspired the nativists and social conservatives. He gave big business and Wall Street massive military spending. And his anti-government rhetoric delighted the Party’s libertarians and right-wing populists.

But Reagan’s coalition remained fragile. It depended fundamentally on creating a common enemy: communists and terrorists abroad, liberals and people of color at home.

On the surface Reagan’s GOP celebrated Norman Rockwell’s traditional, white middle-class, small-town America. Below the surface it stoked fires of fear and hate of “others” who threatened this idealized portrait.

In his first term Barack Obama seemed the perfect foil: A black man, a big- spending liberal, perhaps (they hissed) not even an American.

Republicans accused him of being insufficiently patriotic. Right-wing TV and radio snarled he secretly wanted to take over America, suspend our rights. Mitch McConnell declared that unseating him was his party’s first priority.

But it didn’t work. The 2012 Republican primaries exposed all the cracks and fissures in the GOP coalition.

The Party offered up a Star Wars barroom of oddball characters, each representing a different faction — Bachmann, Perry, Gingrich, Cain, Santorum. Each rose on the strength of supporters and then promptly fell when the rest of the Party got a good look.

Finally, desperately, the GOP turned to a chameleon — Mitt Romney — who appeared acceptable to every faction because he had no convictions of his own. But Romney couldn’t survive the general election because the public saw him for what he was: synthetic and inauthentic.

The 2012 election exposed something else about the GOP: it’s utter lack of touch with reality, its bizarre incapacity to see and understand what was happening in the country. Think of Karl Rove’s delirium on Fox election night.

All of which has given Obama the perfect opening — perhaps the opening he’d been waiting for all along.

Obama’s focus in his second inaugural — and, by inference, in his second term — on equal opportunity is hardly a radical agenda. But it aggravates all the tensions inside the GOP. And it leaves the GOP without an overriding target to maintain its fragile coalition.

In hammering home the need for the rich to contribute a fair share in order to ensure equal opportunity, and for anyone in America — be they poor, black, gay, immigrant, women, or average working person — to be able to make the most of themselves, Obama advances the founding ideals of America in such way that the Republican Party is incapable of opposing yet also incapable of uniting behind.

History and demographics are on the side of the Democrats, but history and demography have been on the Democrats’ side for decades. What’s new is the Republican crackup — opening the way for a new Democratic coalition of socially-liberal young people, women, minorities, middle-class professionals, and what’s left of the anti-corporate working class.

If Obama remains as clear and combative as he has been since Election Day, his second term may be noted not only for its accomplishment but also for finally unraveling what Reagan put together. In other words, John Boehner’s fear may be well-founded

December 08, 2012

Why hire individual lobbyists and send them out in search of Congressmen when you can set up a lobbying clearinghouse and have them come to you? ALEC, the American Legislative Exchange Council, does just that. Funded by the likes of the Koch brothers, Exxon Mobil and PhRMA, a trade association for the pharmaceutical industry, legislators are paid to come to ALEC meetings, where they are wined, dined, and handed "model" legislation to make into law in their state. Through ALEC, corporations vote on "model" legislation alongside politicians behind closed doors. So instead of the lobbyists fanning out on Capitol Hill to meet with Congressmen individually, public officials are invited en masse to an ALEC meeting off Capitol Hill at a fancy resort, and they had better be there or be square if they want a campaign contribution or a great job when their "public service" career comes to an end.

Foundations controlled by the billionaire Koch brothers gave ALEC over $200,000 in 2009. And that's in addition to the undisclosed amount paid in membership dues by Koch Industries. The Koch foundations have given ALEC at least $600,000 in the past decade or so, and Koch Industries has donated an untold amount. There are also a number of other right wing moneybags contributing to ALEC. The Castle Rock Foundation, which is run by right wing beer heir Peter Coors and the right wing John M. Olin Foundation have also been donors to ALEC. Another of the big right wing foundations, the Lynde and Harry Bradley Foundation, has been a funder as well as right winger Richard Scaife.

ALEC brings legislators and their families, rich indivduals and corporations together at luxury resorts. For a few hours of work on a task force and a couple of indoctrination sessions by ALEC experts, part-time legislators can bring the whole family to ALEC’s annual convention, work for a few hours, then stay in swank hotels, attend cool parties and raise funds for the campaign coffer, all heavily subsidized by the corporate till. In 2009, ALEC spent $251,873 on childcare so Mom and Dad could have fun. The legislators from all levels - local, state and national - are then handed model legislation which the legislators then take back home to their districts where they present it as having been crafted by themselves instead of by corporate lawyers. ALEC makes old-fashioned lobbying obsolete. Once legislators return to their state with corporate-sponsored ALEC legislation in hand, the legislators themselves become “super-lobbyists” for ALEC’s corporate agenda, cutting out the middleman. The fusion of politician and lobbyist is complete.

A lot of this legislation then gets passed in states that are controlled by Republican governors and legislators. For instance, in Michigan the legislature just passed a so-called right-to-work law which basically defunds unions. Right to work laws ban mandatory union dues. Unions are one of the biggest funders of Democrats so taking money away from union coffers essentially helps more Republicans get elected.

In Wisconsin Republican Governor Scott Walker tried to strip unions of their collective bargaining rights. After much ballyhoo and a recall election, Walker was able to retain his position although much of his union busting efforts were struck down by a state judge. To give you some idea of the influence that ALEC has in Wisconsin read the following:

21 of these bills or budget provisions have passed, and two were vetoed;

More than $276,000 in campaign contributions were made to ALEC legislators in Wisconsin from ALEC corporations since 2008;

More than $406,000 in campaign contributions were made to ALEC alumnus Governor Walker from ALEC corporations over the same time period for his state campaign account;

At least 49 current Wisconsin legislators are known ALEC members, including the leaders of both the House and Senate as well as other legislators holding key posts in the state. Additionally, the Governor, the Secretary of the Department of Administration, and the Chairman of the Public Service Commission are ALEC alumni; and

At least 17 current legislators have received thousands of dollars of gifts cumulatively from ALEC corporations in the past few years, in the form of flights and hotel rooms filtered through the ALEC “scholarship fund” (complete “scholarship” information is not available).

ALEC’s 2010 annual meeting was held in San Diego at the Manchester Grand Hyatt resort. In California the main ALEC affiliate is the State Policy Network of which the San Diego Institute for Policy Research founded by Steve Francis is a member. Francis unsuccessfully ran for mayor in 2005 as a fiscal conservative against former San Diego Chief of Police Jerry Sanders and Councilwoman Donna Frye. Francis ran again in 2008 against incumbent Jerry Sanders. The San Diego Institute for Policy Research (which now resides at National University) is an ALEC affiliate, according to Daily Kos and generates economic and policy research with regard to the San Diego region. Francis serves on the Board of Advisors for the Institute.

San Diego just escaped an ALEC invasion when Bob Filner beat Carl DeMaio for mayor. According to Jim Miller:

"[The Center on Policy Initiatives report, 'Target San Diego: The Right Wing Assault on Urban Democracy and Smart Government' by Lee Cokorinos] carefully documents the intricate web of connections between the corporate-funded think tanks at the national, state and local level. Some of the key organizations include the aforementioned Americans for Tax Reform, Freedom Works and the American Legislative Exchange Council at the national level; the Project for California's Future, the Pacific Research Institute, the Claremont Institute and the Reason Foundation at the state level; and the Performance Institute [founded by Carl DeMaio] here in San Diego."

Miller goes on:

"In California, privatization advocates at think tanks like the Pacific Research Institute and the Claremont Institute argue that, according to Cokorinos, "a key political objective for the right wing is to compel states and localities to compete with one another in a frenzy of deregulation and privatization that will supposedly attract investment…. Taken to its extreme, this would involve a race to the bottom, where perfect efficiency equals no regulation, and the perfect state is a minimal government that simply secures the sanctity of contracts and provides for the common defense."

"In addition to the work being done at the Pacific Research and Claremont institutes, the Reason Foundation cranks out an endless flow of pro-privatization propaganda aimed at lambasting the incurably wasteful inefficiency of government in contrast to the flawless productivity of market forces. Through the use of "performance reviews," which inevitably show how government just doesn't work like the business world, the idea of "performance-based government" is promoted as the final solution for the hapless public sector, which just needs to be put to sleep.

"As Cokorinos observes, "the performance review, while long a part of organizational culture public and private, is used [in Reason Foundation reports] as a non-threatening entry point to achieve an ideological purpose" to identify inefficiencies that require the expertise of right-wing think-tank experts to be solved. DeMaio, in his time at Reason, and others after him have promoted a radical privatization agenda by releasing annual "privatization reports" that have advocated the privatization of military housing, education, transportation systems, public roads and highways, housing, major infrastructure projects and much more.

"DeMaio founded the Performance Institute in 2001 and set about bringing to San Diego the skills he learned at Reason and while working to starve the beast in the Beltway with Newt Gingrich at the Congressional Institute. The conservative old guard in San Diego seemed to be in peril, with labor, environmental activists and other progressives gaining new political clout. Democrats controlled the City Council for the first time in the history of the city, and a significant political realignment seemed possible."

It's clear San Diego barely escaped an extreme right wing radical who would have privatized city government and made San Diego a model of what ALEC is trying to accomplish throughout the US.

For some time legislation has not been written by elected officials but by lobbyists and presented to elected officials who then get it enacted into law if they have the votes on their side. In the election of 2010 Republicans swept into power at the state level particularly in states like Michigan, Ohio, Wisconsin and Florida. In all Republicans control 27 state legislatures and Democrats control 19. A lot of the right wing action, therefore, is at the state level. High on their agenda is privatization. Publicly owned assets are put up for sale. Government provided services are outsourced to private corporations. Public schools are replaced by charter schools. In the last few years, the Michigan state government has engaged in several privatization efforts. In 1992 the governor issued an executive order creating the Michigan Public-Private Partnership Commission and charged it with analyzing ways in which state services can be provided more efficiently by "introducing competition into the public sector." The commission encouraged the various departments to review each activity and every program in state government to find candidates for potential privatization.

ALEC members represent a who's who of right wing politicians and major corporations. The organization has 2000 legislative members and over 300 corporate members. Corporations not legislators fund almost all of ALEC's activities. Corporations sit on all nine ALEC task forces and vote with legislators to approve “model” bills. The long-term representation of Koch Industries on the governing board means that Koch has had influence over an untold number of ALEC bills.

December 04, 2012

In the ongoing battle of the budget, President Obama has done something very cruel. Declaring that this time he won’t negotiate with himself, he has refused to lay out a proposal reflecting what he thinks Republicans want. Instead, he has demanded that Republicans themselves say, explicitly, what they want. And guess what: They can’t or won’t do it.No, really. While there has been a lot of bluster from the G.O.P. about how we should reduce the deficit with spending cuts, not tax increases, no leading figures on the Republican side have been able or willing to specify what, exactly, they want to cut.

And there’s a reason for this reticence. The fact is that Republican posturing on the deficit has always been a con game, a play on the innumeracy of voters and reporters. Now Mr. Obama has demanded that the G.O.P. put up or shut up — and the response is an aggrieved mumble.

Here’s where we are right now: As his opening bid in negotiations, Mr. Obama has proposed raising about $1.6 trillion in additional revenue over the next decade, with the majority coming from letting the high-end Bush tax cuts expire and the rest from measures to limit tax deductions. He would also cut spending by about $400 billion, through such measures as giving Medicare the ability to bargain for lower drug prices.

Republicans have howled in outrage. Senator Orrin Hatch, delivering the G.O.P. reply to the president’s weekly address, denounced the offer as a case of “bait and switch,” bearing no relationship to what Mr. Obama ran on in the election. In fact, however, the offer is more or less the same as Mr. Obama’s original 2013 budget proposal and also closely tracks his campaign literature.

So what are Republicans offering as an alternative? They say they want to rely mainly on spending cuts instead. Which spending cuts? Ah, that’s a mystery. In fact, until late last week, as far as I can tell, no leading Republican had been willing to say anything specific at all about how spending should be cut.

The veil lifted a bit when Senator Mitch McConnell, in an interview with The Wall Street Journal, finally mentioned a few things — raising the Medicare eligibility age, increasing Medicare premiums for high-income beneficiaries and changing the inflation adjustment for Social Security. But it’s not clear whether these represent an official negotiating position — and in any case, the arithmetic just doesn’t work.

Start with raising the Medicare age. This is, as I’ve argued in the past, a terrible policy idea. But even aside from that, it’s just not a big money saver, largely because 65- and 66-year-olds have much lower health costs than the average Medicare recipient. When the Congressional Budget Office analyzed the likely fiscal effects of a rise in the eligibility age, it found that it would save only $113 billion over the next decade and have little effect on the longer-run trajectory of Medicare costs.

Increasing premiums for the affluent would yield even less; a 2010 study by the budget office put the 10-year savings at only about $20 billion.

Changing the inflation adjustment for Social Security would save a bit more — by my estimate, about $185 billion over the next decade. But put it all together, and the things Mr. McConnell was talking about would amount to only a bit over $300 billion in budget savings — a fifth of what Mr. Obama proposes in revenue gains.

The point is that when you put Republicans on the spot and demand specifics about how they’re going to make good on their posturing about spending and deficits, they come up empty. There’s no there there.

And there never was. Republicans claim to be for much smaller government, but as a political matter they have always attacked government spending in the abstract, never coming clean with voters about the reality that big cuts in government spending can happen only if we sharply curtail very popular programs. In fact, less than a month ago the Romney/Ryan campaign was attacking Mr. Obama for, yes, cutting Medicare.

Now Republicans find themselves boxed in. With taxes scheduled to rise on Jan. 1 in the absence of an agreement, they can’t play their usual game of just saying no to tax increases and pretending that they have a deficit reduction plan. And the president, by refusing to help them out by proposing G.O.P.-friendly spending cuts, has deprived them of political cover. If Republicans really want to slash popular programs, they will have to propose those cuts themselves.

So while the fiscal cliff — still a bad name for the looming austerity bomb, but I guess we’re stuck with it — is a bad thing from an economic point of view, it has had at least one salutary political effect. For it has finally laid bare the con that has always been at the core of the G.O.P.’s political strategy.

October 14, 2012

There is no shortage of reasons not to vote Republican. The litany includes tax cuts for the rich, cutbacks in government programs, obstructing needed legislation, disregard for the environment, denial of women's and other human rights, military escalation.

But the following five reasons have to do with money -- specifically, who's paying for the $1 trillion of annual tax savings and tax avoidance for the super-rich? And who's paying for the $1 trillion of national security to protect their growing fortunes? The Republicans want that money to come from the rest of us.

Paul Ryan's proposed budget would take about a half-trillion dollars a year from programs that support the poor. This is a continuation of a 15-year shredding of the safety net by Republicans. The GOP-controlled Congress of Bill Clinton created Temporary Assistance to Needy Families (TANF), which has experienced a 60% drop in its caseload despite growing poverty, and which, according to the Urban Institute, provides "maximum benefits [that] even in the more generous states were far below the federal poverty level of $1,525 a month for a family of three."

The Supplemental Nutrition Assistance Program (SNAP), another vital program that serves 50 million "food insecure" Americans, would be cut by $16 billion under the House version of the Farm Bill. The average recipient currently gets $4.30 a day for food.

Encouraged by the steady Republican demand for lower corporate tax rates, big business has effected a stunning shift in taxpaying responsibility over the years, from corporate income tax to worker payroll tax. For every dollar of payroll tax paid in the 1950s, corporations paid three dollars. Now it's 22 cents.

It's gotten worse in recent years, as corporations decided to drastically cut their tax rates after the start of the recession. After paying an average of 22.5% from 1987 to 2008, they've paid an annual rate of 10% since. This represents a sudden $250 billion annual loss in taxes.

Republicans claim that almost half of Americans don't pay taxes. But when payroll and state and local taxes are considered, middle-income Americans pay at about the same rate as the highest earners. Only about 17% of households paid no federal income tax or payroll tax in 2009. And average workers get little help from people who make most of the money. Because of the $110,000 cutoff for payroll tax deductions, the richest 10% of Americans save $150 billion a year in taxes.

3. Job Shrinkage -- Republicans want Young People to Pay

The jobs that exist for young Americans are paying much less than just a few years ago. During and after the recession, according to the National Employment Law Project, low-wage jobs ($7.69 to $13.83 per hour) dropped by 21 percent, and then grew back at a 58 percent rate. Mid-wage jobs ($13.84 to $21.13 per hour) dropped by 60 percent and grew back at a 22 percent rate. In other words, the median wage is falling fast.

Yet Republicans killed a jobs bill that was supported by two-thirds of the public.

An academic study of employment data over 64 years found that an average of two million jobs per year were created under Democratic presidents, compared to one million under Republican presidents. Similar results were reported by the Bloomberg Government Barometer.

4. Retirement Planning -- Republicans want the Seniors to Pay

There's a common misconception in our country that most seniors are financially secure. Actually, Census data reveals that elderly people experience greater inequality than any other population group, with the poorest one-fifth receiving just 5.5% of the group's total resources, while the wealthiest one-fifth receives 46%.

The senior wealth gap is further evidenced by data during the great 30-year surge in inequality. The average over-60 wealth was five times greater than the median in 1995, as would be expected with a small percentage of ultra-high-net-worth individuals and a great majority of low-wealth people. Further confirmation comes from 2004 Harvard data that shows rising inequality within all age groups, including the elderly. Indeed, an MIT study found that about 46% of U.S. senior citizens have less than $10,000 in financial assets when they die.

For the vast majority of seniors, Social Security has been life-sustaining, accounting for 55% of their annual income. Because of this successful and popular program, the senior poverty rate has dropped from 50% to 10%, and due to life-long contributions from working Americans the program has a $2.7 trillion surplus while contributing nothing to the deficit. Yet Republicans want to undo it.

5. Public Fire Sale -- Republicans want Society to Pay

The common good is threatened by the Republican disdain for public resources. Drilling and mining and pipeline construction continues on public lands, and the House of Representatives has voted over 100 times since 2011 to subsidize the oil and gas industry while weakening environmental, public health, and safety requirements. The "land grab" is pitting corporate muscle against citizens' rights.

Sadly, most of America envisions a new era of energy independence that increases our world-leading consumption of energy while depending on a proliferation of dirty technologies to extract it. Threats of methane emissions, water pollution, and earthquake activity don't deter the fossil fuel enthusiasts.

It gets worse. Republicans are eager to sell public land. Paul Ryan's "Path to Prosperity" proposes to sell millions of acres of "unneeded federal land" and billions of dollars worth of federal assets. His running mate Mitt Romney admits that he doesn't know "what the purpose is" of public lands.

That brings us to the heart of the reasons not to vote Republican. Their reckless belief in the free market, and their dependency on corporatization and privatization to run the country, means that middle-class Americans keep paying for the fabulously wealthy people at the top who think they deserve everything they've taken from society.

Paul Buchheit is a college teacher, an active member of US Uncut Chicago, founder and developer of social justice and educational websites (UsAgainstGreed.org, PayUpNow.org, RappingHistory.org), and the editor and main author of "American Wars: Illusions and Realities" (Clarity Press). He can be reached at paul@UsAgainstGreed.org.

June 26, 2012

Recently I publicly debated a regressive Republican who said Arizona and every other state should use whatever means necessary to keep out illegal immigrants. He also wants English to be spoken in every classroom in the nation, and the pledge of allegiance recited every morning. “We have to preserve and protect America,” he said. “That’s the meaning of patriotism.”

To my debating partner and other regressives, patriotism is about securing the nation from outsiders eager to overrun us. That’s why they also want to restore every dollar of the $500 billion in defense cuts scheduled to start in January.

Yet many of these same regressives have no interest in preserving or protecting our system of government. To the contrary, they show every sign of wanting to be rid of it.

In fact, regressives in Congress have substituted partisanship for patriotism, placing party loyalty above loyalty to America.

The GOP’s highest-ranking member of Congress has said his “number one aim” is to unseat President Obama. For more than three years congressional Republicans have marched in lockstep, determined to do just that. They have brooked no compromise.

They couldn’t care less if they mangle our government in pursuit of their partisan aims. Senate Republicans have used the filibuster more frequently in this Congress than in any congress in history.

House Republicans have been willing to shut down the government and even risk the full faith and credit of the United States in order to get their way.

Regressives on the Supreme Court have opened the floodgates to unlimited money from billionaires and corporations overwhelming our democracy, on the bizarre theory that money is speech under the First Amendment and corporations are people.

Regressive Republicans in Congress won’t even support legislation requiring the sources of this money-gusher be disclosed.

They’ve even signed a pledge – not of allegiance to the United States, but of allegiance to Grover Norquist, who has never been elected by anyone. Norquist’s “no-tax” pledge is interpreted only by Norquist, who says closing a tax loophole is tantamount to raising taxes and therefore violates the pledge.

True patriots don’t hate the government of the United States. They’re proud of it. Generations of Americans have risked their lives to preserve it. They may not like everything it does, and they justifiably worry when special interests gain too much power over it. But true patriots work to improve the U.S. government, not destroy it.

But regressive Republicans loathe the government – and are doing everything they can to paralyze it, starve it, and make the public so cynical about it that it’s no longer capable of doing much of anything. Tea Partiers are out to gut it entirely. Norquist says he wants to shrink it down to a size it can be “drowned in a bathtub.”

So when regressives talk about “preserving and protecting” the nation, be warned: They mean securing our borders, not securing our society. Within those borders, each of us is on our own. They don’t want a government that actively works for all our citizens.

Their patriotism is not about coming together for the common good. It is about excluding outsiders who they see as our common adversaries.

June 09, 2012

I have never heard so many conservative pundits offering gratuitous avuncular advice to Barack Obama that his campaign strategy attacking Bain Capital will not get him anywhere. Joe Scarborough of Morning Joe on msnbc and others have gone on and on about how using Bain Capital against Mitt Romney is not a good strategy. Well, when conservatives offer advice to Barack Obama about what will or will not work for him, Obama better do just the opposite of what they recommend because ultimately they want him to lose. Therefore, he should double down, not abandon, the Bain Capital strategy.

But the problem with Obama is that he starts out praising Romney for being a good businessman (Clinton said he was "superlative"), certainly something no Republican would do for Obama. Then Obama goes on to say that, while Romney created wealth for himself and his investors, the President of the US must be concerned about creating jobs for everyone. This is a roundabout, circuitous route to putting Romney down, a circumlocution, something the Republicans would never do. Instead, they start right our calling Obama a failure. Obama starts out praising Romney, then seeming to walk on eggshells aiming at a scholarly criticism of his activities at Bain. Obama should get right to the point: Romney made his money at Bain by destroying jobs and companies, picking over their bones like the vulture he is.

Bain Capital is a private equity (formerly known as leveraged buyout) firm. They changed the name to protect the guilty. What they do is to pick the bones of perfectly healthy companies and in many cases drive them into bankruptcy. Here's how it works: they buy a private company with borrowed money (the leverage in leveraged buyout). But they don't buy just any company. They buy one with assets they can strip. It just so happens that they usually buy companies that have a unionized work force. Why? Because a company with a unionized work force usually has a pension fund. Their goal is to get their hands on that pension fund and transfer that asset to Bain Capital. So they borrow the money to buy a company, strip the pension fund and fire all the unionized workers. Then they hire a nonunionized work force to do the same jobs at half the pay. In this way they claim to have made the company "more efficient." Contrary to Republican hogwash, wealthy Individuals like Romney are job destroyers not job creators. Then the vulture capitalists borrow as much money as they can using the company itself as collateral. The next thing they do is to pay Mitt Romney himself, his partners and investors all the borrowed money plus the pension fund. They may also sell off parts of the company or move jobs overseas. Then the company is left to sink or swim on its own. If it can manage to pay all the increased debt Bain Capital put it in, it swims. If not, it sinks and goes bankrupt. In either case, Mitt Romney and Bain Capital have made tens or hundreds of millions of dollars.

President Obama's attack on Romney and Bain Capital has been rather tepid and timid. He essentially says that, while Romney and Bain have done wonderfully well for Bain Capital's investors making them a lot of money, that this is not the skill set required of the President of the United States who has to create jobs for the general public, not make a lot of money for investors. This is typical Barack Obama rationalizing. Instead, he should go for Romney's jugular, something the Republicans including Romney never fail to do, not congratulate him on making money for his investors. First of all, even the companies that have managed to survive the Bain treatment have ended up with a non-union work force working for minimal pay. The fact that Staples and some others are successful companies has nothing to do with it. Staples was never acquired by Bain. They just played a venture capital role there. Romney's role as a vulture capitalist was to identify companies with tangible assets and then to figure out a way to get control of those assets for Bain and its investors. But it gets worse from there.

Bain Capital had bought a controlling interest in a paper products company called Ampad for $5 million in 1992. Two years later, after Ampad bought a factory in Marion, Ind., the new management team dismissed about 200 workers, slashed salaries and benefits, and hired strikebreakers after the union called a walkout.

“We were just fired,” Randy Johnson, a former worker and union officer at the Marion plant, recalled in a telephone interview. “They came in and said, ‘You’re all fired. If you want to work for us, here’s an application.’ We had insurance until the end of the week. That was it. It was brutal.”

In October 1994, Johnson and other striking workers drove to Massachusetts to protest Romney’s Senate campaign. “We chased him everywhere,” Johnson recalled. “He took good jobs with benefits, and created low-wage, part-time, no-benefit jobs. That’s what he was creating with his investments.”

The Republicans like to point out how Solyndra, which was invested in by Obama's administration and then went bankrupt, was a huge flop. No matter how many successes the Obama administration has had, Republicans will characterize the whole program as a failure because of the failure of a small part of it. They don't mention the other successes like saving General Motors. By the same token Obama should talk about Ampad, GST Steel, Aventis and other companies whose bones have been picked by Romney and Bain and ignore any successes Romney and Bain might have had.

And let's take a look at the record specifically of Bain Capital, which Romney owned from 1992 to 2001.

• 1988: Bain put $10 million down to buy Stage Stores, and in the mid-'90s took it public, collecting $184 million from stock offerings. Stage filed for bankruptcy in 2000.• 1992: Bain bought American Pad & Paper, investing $5 million, and collected $107 million from dividends. The business filed for bankruptcy in 2000.• 1993: Bain invested $25 million when buying GS Industries, and received $58 million from dividends. GS filed for bankruptcy in 2001.• 1994: Bain put $27 million down to buy medical equipment maker Dade Behring. Dade borrowed $230 million to buy some of its shares. Dade went bankrupt in 2002.• 1997: Bain invested $41 million when buying Details, and collected at least $70 million from stock offerings. The company filed for bankruptcy in 2003.

President Obama is afraid to criticize Romney's Bain Capital days because Republicans will accuse him of being against capitalism. Well, so what. Today's capitalism is not your Grandfather's capitalism. If a law were passed making it illegal to raid a company's pension fund and make a large payout to investors, would that be against capitalism? Capitalism is malleable. It only exists within a legal framework. Some of it should be outlawed like the part that let Romney buy companies with borrowed money and then take a tax writeoff because the money was borrowed. Wall street lobbyists have changed the laws regarding capitalism to their own advantage. The Commodities Futures Modernization Act of 2000 deregulated derivatives and helped to cause the financial meltdown of 2008. Advocating reregulating derivatives is not anti-capitalistic. So if Obama were to go after Romney's record as a vulture capitalist, it does not mean he is against capitalism, only capitalism as it has been "modernized" and deregulated.

Obama should double down on what Romney and Bain Capital really did which was to load companies up with debt, take the borrowed money for their own personal benefit, raid pension funds, fire unionized workers and hire nonunionized ones at much reduced pay, sell off profitable parts of companies and then force them into bankruptcy. This is exactly what a vulture does: picks apart a carcass for its own profit. He should not give Romney one iota of credit for making money for himself and his investors. After all Romney will never be caught dead giving Obama one iota of credit for anything.

April 03, 2012

The big bad event of last week was, of course, the Supreme Court hearing on health reform. In the course of that hearing it became clear that several of the justices, and possibly a majority, are political creatures pure and simple, willing to embrace any argument, no matter how absurd, that serves the interests of Team Republican.

But we should not allow events in the court to completely overshadow another, almost equally disturbing spectacle. For on Thursday Republicans in the House of Representatives passed what was surely the most fraudulent budget in American history.

And when I say fraudulent, I mean just that. The trouble with the budget devised by Paul Ryan, the chairman of the House Budget Committee, isn’t just its almost inconceivably cruel priorities, the way it slashes taxes for corporations and the rich while drastically cutting food and medical aid to the needy. Even aside from all that, the Ryan budget purports to reduce the deficit — but the alleged deficit reduction depends on the completely unsupported assertion that trillions of dollars in revenue can be found by closing tax loopholes.

And we’re talking about a lot of loophole-closing. As Howard Gleckman of the nonpartisan Tax Policy Center points out, to make his numbers work Mr. Ryan would, by 2022, have to close enough loopholes to yield an extra $700 billion in revenue every year. That’s a lot of money, even in an economy as big as ours. So which specific loopholes has Mr. Ryan, who issued a 98-page manifesto on behalf of his budget, said he would close?

None. Not one. He has, however, categorically ruled out any move to close the major loophole that benefits the rich, namely the ultra-low tax rates on income from capital. (That’s the loophole that lets Mitt Romney pay only 14 percent of his income in taxes, a lower tax rate than that faced by many middle-class families.)

So what are we to make of this proposal? Mr. Gleckman calls it a “mystery meat budget,” but he’s being unfair to mystery meat. The truth is that the filler modern food manufacturers add to their products may be disgusting — think pink slime — but it nonetheless has nutritional value. Mr. Ryan’s empty promises don’t. You should think of those promises, instead, as a kind of throwback to the 19th century, when unregulated corporations bulked out their bread with plaster of paris and flavored their beer with sulfuric acid.

Come to think of it, that’s precisely the policy era Mr. Ryan and his colleagues are trying to bring back.

So the Ryan budget is a fraud; Mr. Ryan talks loudly about the evils of debt and deficits, but his plan would actually make the deficit bigger even as it inflicted huge pain in the name of deficit reduction. But is his budget really the most fraudulent in American history? Yes, it is.

To be sure, we’ve had irresponsible and/or deceptive budgets in the past. Ronald Reagan’s budgets relied on voodoo, on the claim that cutting taxes on the rich would somehow lead to an explosion of economic growth. George W. Bush’s budget officials liked to play bait and switch, low-balling the cost of tax cuts by pretending that they were only temporary, then demanding that they be made permanent. But has any major political figure ever premised his entire fiscal platform not just on totally implausible spending projections but on claims that he has a secret plan to raise trillions of dollars in revenue, a plan that he refuses to share with the public?

What’s going on here? The answer, presumably, is that this is what happens when extremists gain complete control of a party’s discourse: all the rules get thrown out the window. Indeed, the hard right’s grip on the G.O.P. is now so strong that the party is sticking with Mr. Ryan even though it’s paying a significant political price for his assault on Medicare.

Now, the House Republican budget isn’t about to become law as long as President Obama is sitting in the White House. But it has been endorsed by Mr. Romney. And even if Mr. Obama is reelected, the fraudulence of this budget has important implications for future political negotiations.

Bear in mind that the Obama administration spent much of 2011 trying to negotiate a so-called Grand Bargain with Republicans, a bipartisan plan for deficit reduction over the long term. Those negotiations ended up breaking down, and a minor journalistic industry has emerged as reporters try to figure out how the breakdown occurred and who was responsible.

But what we learn from the latest Republican budget is that the whole pursuit of a Grand Bargain was a waste of time and political capital. For a lasting budget deal can only work if both parties can be counted on to be both responsible and honest — and House Republicans have just demonstrated, as clearly as anyone could wish, that they are neither.

Paul Krugman is professor of Economics and International Affairs at Princeton University and a regular columnist for The New York Times. Krugman was the 2008 recipient of the Nobel Prize in Economics. He is the author of numerous books, including The Conscience of A Liberal, and his most recent, The Return of Depression Economics.

March 24, 2012

“Promoting the natural rights and the inherent dignity of the individual must be the central focus of all government.”

House Budget Committee Chairman Rep. Paul Ryan, R-Wis., holds up a copy of his budget plan entitled "The Path to Prosperity," Tuesday, March 20, 2012, during a news conference on Capitol Hill in Washington. (Jacquelyn Martin, Associated Press)

That’s what Congressman Paul Ryan wrote earlier this month in an exclusive commentary for Spotlight on Poverty and Opportunity. This week, he revealed exactly where his laser-like focus on dignity would lead this nation. He released his budget proposal, as clear a statement of one’s principles and priorities as there is in politics.

Here are the results, and they’re not pretty. Nation readers with young children should probably ask them to leave the room before reading onward.

The congressman would also block-grant the program so it would no longer be able to respond to rising need during times like these—in 2010 alone food stamps kept 3.9 million people out of poverty. If you liked the cash assistance for poor families (TANF) block grant—which resulted in a free-fall from 68 of every 100 poor families receiving help to 27 of every 100—then you will absolutely love the Don’t Worry Ryan Will Feed You block grant.

All told, Ryan hands out about $4.4 trillion in tax cuts that primarily benefit the very best off, and pays for it with $4.15 trillion in spending cuts to programs that primarily benefit the poor and middle class.

Mr. Ryan’s focus on dignity… means the repeal of the Affordable Care Act and attacking Medicaid with his block-granting light saber. The repeal results in at least 33 million people losing their healthcare, and the Don’t Worry Ryan Will Heal You block grant shifts costs of covering poor people to the states (because their budgets are in such great shape)—cutting federal funding by approximately 20 percent over the next decade and adding “tens of millions of Americans to the ranks of the uninsured and underinsured,” according the Center on Budget and Policy Priorities (CBPP). Worth noting too is that two out of every three Medicaid dollars currently goes to care for people in nursing homes, victims of catastrophic accidents and disabled children, according to the Center for American Progress.

Mr. Ryan’s focus on dignity… means reneging on the already austere discretionary spending level just passed by Congress during the deficit ceiling debacle so that the Congressman can lower it by another $19 billion. He would further squeeze spending on programs such as WIC, Head Start, affordable housing, heating and cooling assistance, childcare assistance, education, public health. Defense, however, would receive $203 billion more than the Pentagon itself is asking for over the next decade (at the expense of cuts to programs that veterans disproportionately rely on).

“Non-defense discretionary spending is already on a path to be at the lowest level it’s been since the Eisenhower administration and the House GOP budget is talking about cutting it by an additional 25 percent,” said Melissa Boteach, director of Half in Ten, a campaign to reduce poverty by 50 percent over ten years.

Mr. Ryan’s focus on dignity… means knowing the poor and vulnerable will be hit and hit hard, but not being entirely sure how and where. Jim Horney, vice president for federal fiscal policy at CBPP, says the congressman’s $1.2 trillion in unspecified cuts to “non-health mandatory” programs amount to a “massive hidden” cut to the safety net.

“You cannot achieve those savings without making very deep cuts in the crucial safety-net programs in this category, such as…Supplemental Security Income for the elderly and disabled poor, Temporary Assistance for Needy Families (TANF), the school lunch and other child nutrition programs, and unemployment insurance,” writes Horney.

Mr. Ryan’s focus on dignity… means not only extending the Bush tax cuts for the wealthy but handing them an additional $3 trillion in tax cuts to boot. If he just extended the Bush tax cuts, but nixed the Don’t Worry Rich People, Ryan Loves You additional tax cuts—that alone would pay for the repeal of the Affordable Care Act, the Medicaid cuts, the SNAP cuts and domestic discretionary spending cuts.

All told, Ryan hands out about $4.4 trillion in tax cuts that primarily benefit the very best off, and pays for it with $4.15 trillion in spending cuts to programs that primarily benefit the poor and middle class.

“The inherent dignity of all people is the foundational principle of Catholic social teaching because we’re all created in the image of God,” Father Thomas Kelly, a constituent of Representative Ryan’s, told me after a conference call with Half in Ten. “A budget that cuts nutrition programs for poor children and tells working families they must sacrifice even more so the wealthy can have bigger tax cuts offends bedrock Catholic values. It’s hard to square Representative Ryan’s moral rhetoric with the cruel reality of this budget.”

“A budget that diminishes what we provide for the one in six Americans who are struggling with hunger is not a budget befitting a moral country,” said Rabbi Steve Gutow, president of the Jewish Council for Public Affairs. “A plan reflective of our national priorities should seek to lift up our neighbors in a time of high unemployment and poverty; instead, this demands the most from those with the least, and flies in the face of the common dignity of all Americans.”

Mr. Ryan’s focus on dignity… means that the man is in desperate need of LASIK surgery. Better hurry, before he’s forced to rely on his proposed Don’t Worry Ryan Will Give You A Voucher healthcare system for seniors.

Greg Kaufmann is a Nation contributor. His column, This Week in Poverty, posts every Friday morning. His work has also appeared on Common Dreams, AlterNet, Tikkun.org, NPR.org, CBS News.com, and MichaelMoore.com. Constructive comments and ideas will also be read at WeekInPoverty@me.com. Please follow him on Twitter as well.

March 23, 2012

Republican Congressman Paul Ryan has laid out a new budgetary plan for the US, part of which is his plan for lowering taxes (on the rich), something that Republicans have been consistently doing with a vengeance since the days of Ronald Reagan. (See "How Republican Presidents Lowered Taxes on the Rich" Parts 1 and 2.) As pointed out in Part 1, Reagan "flattened" the tax code by reducing it down to just two tax rates just as Paul Ryan is proposing, but Ryan is taking it one step further than even Reagan dared to do. Reagan's tax code called for two rates of 15% for married couples filing jointly with (inflation adjusted) incomes up to $56,427. Ryan wants to lower that to 10% for incomes up to $100,000. Also Ryan wants to lower Reagan's tax rate on high earners from 28% to 25% for incomes over $100,000. Right now there are six tax brackets which were set by the Bush tax cuts. They can be found in Part 2. Of those Ryan's plan would give a tax break to the upper five tax brackets. The only tax bracket that wouldn't get a break under Ryan's plan would be the lowest one which is the tax bracket for the poor (naturally). Their tax rate would remain at 10%.

So there is nothing new and revolutionary here. It's just the same old story: lower taxes on the rich and raise them or keep them the same for the poor. In addition Ryan wants to eliminate capital gains taxes entirely which are the taxes which most rich people pay since most of their income is in capital gains. Even Ronald Reagan who lowered the capital gains tax from 28% to 20% didn't have the audacity to do that! During the Clinton years capital gains taxes were raised back up to 28% and 29%. This was largely responsible for the fact that Clinton's budgets in the later years of his Presidency produced a budgetary surplus. When Bush came in in 2000, capital gains taxes went back down to 15%, even lower than Reagan's audacious move. This is largely responsible for the fact that Bush drove up the deficit and the debt to record proportions. Obama has not been able to move tax rates on the rich back up to where they were under Clinton. This is why Obama has continued to run record deficits. He is still operating under the Bush tax rates. It's not for Obama's lack of trying. You can blame the Republican controlled House and the filibuster rule, which killed Obama's legislative proposals even when Democrats controlled both Houses of Congress, for that.

While Ryan's plan would devastate Federal government revenues by lowering taxes on the rich through both income tax and capital gains tax cuts, his proposal for corporate tax cuts would provide the death knell for revenues which would usher in an age of extreme austerity for average American citizens because none of the social programs which provide for the poor, the sick and the elderly would have a prayer of survivng. Ryan wants to eliminate the corporate income tax entirely replacing it with a "Business Consumption Tax" of 8.5%. The current corporate income tax, which hardly any corporations actually pay, is 35%. Even with the current rate corporate taxes provide a drastically decreased portion of Federal revenues compared to what they provided just a few years ago. In 2010 corporate income taxes provided just 9% of Federal revenues whereas in 1960 corporate income taxes provided 23% of Federal revenues. In the 1950s it was even more - 28%.

Ryan's Business Consumption Tax is similar to a VAT tax which is common in Europe. This might make some kind of sense if it applied to imports and not just domestically produced products as it does in Germany. This tends to encourage domestic production and consumption and decrease imports. However, Ryan's rate of 8.5% is ridiculously low. In Germany the VAT tax is 19%!!

Ryan's plan to eliminate the corporate income tax rate entirely would be a disaster for the US. Instead, the loopholes should be eliminated so that corporations contribute 20%-30% of Federal revenues as they did in the 1950s and 60s. What has happened since 1980 is that Federal revenues have depended more and more on taxes collected from the poor and middle class as FICA and SECA (payroll) tax rates which are regressive have been raised while capital gains and corporate taxes have been either formally or effectively reduced.

In announcing the Republicans’ new budget and tax plan Tuesday, House Budget Committee Chairman Paul Ryan said “We are sharpening the contrast between the path that we’re proposing and the path of debt and decline the president has placed us upon.”

Ryan is right about sharpening the contrast. But the plan doesn’t do much to reduce the debt. Even by its own estimate the deficit would drop to $166 billion in 2018 and then begin growing again.

The real contrast is over what the plan does for the rich and what it does to everyone else. It reduces the top individual and corporate tax rates to 25 percent. This would give the wealthiest Americans an average tax cut of at least $150,000 a year.

The money would come out of programs for the elderly, lower-middle families, and the poor.

Seniors would get subsidies to buy private health insurance or Medicare – but the subsidies would be capped. So as medical costs increased, seniors would fall further and further behind.

Other cuts would come out of food stamps, Pell grants to offset the college tuition of kids from poor families, and scores of other programs that now help middle-income and the poor.

The plan also calls for repealing Obama’s health-care overhaul, thereby eliminating healthcare for 30 million Americans and allowing insurers to discriminate against (and drop from coverage) people with pre-existing conditions.

The plan would carve an additional $19 billion out of next year’s “discretionary” spending over and above what Democrats agreed to last year. Needless to say, discretionary spending includes most of programs for lower-income families.

Not surprisingly, the Pentagon would be spared.

So what’s the guiding principle here? Pure social Darwinism. Reward the rich and cut off the help to anyone who needs it.

Ryan says too many Americans rely on government benefits. “We don’t want to turn the safety net into a hammock that lulls able-bodied people into lives of dependency.”

Well, I have news for Paul Ryan. Almost 23 million able-bodied people still can’t find work. They’re not being lulled into dependency. They and their families could use some help. Even if the economy continues to generate new jobs at the rate it’s been going the last three months, we wouldn’t see normal rates of unemployment until 2017.

And most Americans who do have jobs continue to lose ground. New research by professors EmmanualSaez and Thomas Pikkety show that the average adjusted gross income of the bottom 90 percent was $29,840 in 2010 — down $127 from 2009 and down $4,842 from 2000 — and just slightly higher than it was forty-six years ago in 1966 (all figures adjusted for inflation).

They could use better schools, access to higher education, lower-cost health care, improved public transportation, and lots of other things Ryan and his colleagues are intent on removing.

Meanwhile, America’s rich continue to grow richer — and many of them (and their heirs) are being lulled into lives whose hardest task is summoning the help.

Anyone who thought the Great Recession might reduce America’s wild lurch toward wild inequality should think again. The most recent data show that just 15,600 super-rich households – the top 1 tenth of 1 percent – pocketed 37 percent of all the economic gains in 2010. The rest of the gains went to others in the top 10 percent.

Republican Social Darwinists are determined that the Bush tax cuts of 2001 and 2003 be made permanent. Those cuts saved the richest 1 percent of taxpayers (roughly 1.4 million people) more money on their taxes last year than the rest of America’s 141 million taxpayers received in total income.

Thank you, House Republicans, for “sharpening the contrast” between your radical Social Darwinism and those of us who still cling to the belief that the most fortunate have a responsibility to the rest.

Gas prices continue to rise, which is finally giving Republicans an issue. Mitt Romney is demanding the President open up more domestic drilling; the super PAC behind Rick Santorum just released a new ad in Louisiana blasting the President on gas prices; and the GOP is attacking the White House on the Keystone XL Pipeline.

But the rise in gas prices has almost nothing to do with energy policy. It has everything to do with America’s continuing failure to adequately regulate Wall Street. But don’t hold your breath waiting for Republicans to tell the truth.

As I’ve noted before, oil supplies aren’t being squeezed. Over 80 percent of America’s energy needs are now being satisfied by domestic supplies. In fact, we’re starting to become an energy exporter. Demand for oil isn’t rising in any event. Demand is down in the U.S. compared to last year at this time, and global demand is still moderate given the economic slowdowns in Europe and China.

But Wall Street is betting on higher oil prices in the future — and that betting is causing prices to rise. The Street is laying odds that unrest in Syria will spill over into other countries or that tensions with Iran will affect the Persian Gulf, and that global demand will pick up as American consumers bounce back to life.

These bets are pushing up oil prices because Wall Street firms and other big financial players now dominate oil trading.

Financial speculators historically accounted for about 30 percent of oil contracts, producers and end users for about 70 percent. But today speculators account for 64 percent of all contracts.

Bart Chilton, a commissioner at the Commodity Futures Trading Commission — the federal agency that regulates trading in oil futures, among other commodities — warns that too few financial players control too much of the oil market. This allows them to push oil prices higher and higher — not only on the basis of their expectations about the future but also expectations about how high other speculators will drive the price.

In other words, a relatively few players with very deep pockets are placing huge bets on oil — and you’re paying.

Chilton estimates that drivers of small cars like Honda Civics are paying an extra $7.30 every time they fill up — and that money is going into the pockets of Wall Street speculators. Drivers of larger vehicles like the Ford Explorer are paying speculators $10.41 when they fill up.

Funny, but I don’t hear Republicans rail against Wall Street speculators. Could this have anything to do with the fact that hedge funds and money managers are bankrolling the GOP as never before?

Wall Street isn’t bankrolling Democrats nearly as much this time around because the Street is still smarting from the Dodd-Frank Wall Street reform law pushed by the Democrats, and from the president’s offhand remark in 2010 calling the denizens of the Street “fat cats.”

The Commodity Futures Trading Commission is trying to limit how much speculators can bet in oil futures — a power it was given by Dodd-Frank. It issued a rule in October, but it won’t take effect for another year.

Meanwhile, Wall Street has gone to court to stop the rule. It’s already won a stay.

Yet even if they lose the presidency on Election Day they’re still likely to be in charge of at least one house of Congress as well as several state legislators and governorships. That’s a problem for the nation.

The GOP’s drift toward loopyness started in 1993 when Bill Clinton became the first Democrat in the White House in a dozen years – and promptly allowed gays in the military, pushed through the Brady handgun act, had the audacity to staff his administration with strong women and African-Americans, and gave Hillary the task of crafting a national health bill. Bill and Hillary were secular boomers with Ivy League credentials who thought government had a positive role to play in peoples’ lives.

This was enough to stir right-wing evangelicals in the South, social conservatives in the Midwest and on the Great Plains, and stop-at-nothing extremists in Washington and the media who hounded Bill Clinton for eight years, then stole the 2000 election from Al Gore, and Swift-boated John Kerry in 2004.

They were not pleased to have a Democrat back in the White House in 2008, let alone a black one. They rose up in the 2010 election cycle as “tea partiers” and have by now pushed the GOP further right than it has been in more than eighty years. Even formerly sensible senators like Olympia Snowe, Orrin Hatch, and Dick Lugar are moving to the extreme right in order to keep their seats.

At this rate the GOP will end up on the dust heap of history. Young Americans are more tolerant, cosmopolitan, better educated, and more socially liberal than their parents. And relative to the typical middle-aged America, they are also more Hispanic and more shades of brown. Today’s Republican Party is as relevant to what America is becoming as an ice pick in New Orleans.

In the meantime, though, we are in trouble. America is a winner-take-all election system in which a party needs only 51 percent (or, in a three-way race, a plurality) in order to gain control.

In parliamentary systems of government, small groups representing loony fringes can be absorbed relatively harmlessly into adult governing coalitions.

But here, as we’re seeing, a loony fringe can take over an entire party — and that party will inevitably take over some part of our federal, state, and local governments.

Republican politicians are in the habit of assailing President Obama with statements like the following: "I believe that President Obama is the worst President in American history." Really? Based on what facts? Was he worse than Willard Fillmore? Was he worse than Franklin Pierce? Was he worse then James Buchanan? According to every poll including the Chicago Tribune, the New York Times, the Wall Street Journal, C-SPAN and Sienna College, these Presidents are considered the worst. But never mind that. What Republican politicians and right wing talking heads like Rush Limbaugh, Glenn Beck, Sean Hannity and other right wingers do is to create an alternative reality based not on facts but on beliefs. They've constructed a completely fictitious alternative Barack Obama, one that is worthy of being detested and ridiculed and demeaned. Then their job is to sell that image of Barack Obama to the American public. The American public, most of them, have never met Barack Obama. They've never discussed politics, economics or anything else with Barack Obama. Their only knowledge of Barack Obama is whatever comes over the TV tube. So competing realities are out their for defining and either demonizing or angelizing Barack Obama. According to this view of reality, the side with the most TV and media output wins. Republican politicians and TV and talking head radio personalities are mostly either lawyers or people like lawyers with immense powers to persuade and convince people of practically anything. A good lawyer can convince a jury that an innocent man is guilty or that a guilty man is innocent. That is their job, and the better that the lawyer can distort the truth, the better lawyer he or she is considered to be.

When it comes to politics, the more right wing talking heads can convince people that Barack Obama is the worst President ever, the more money they make. The whole point is to demonize Obama by associating him with Muslims or Kenyans or the devil. They don't quite go so far as to associate him with Hitler. That seems to be one line even the lunatic fringe will not cross. But they tell you he is a European socialist despite the fact that he went all out to save the big banks, the very beating heart of capitalism, from complete collapse in the recent financial calamity. Despite the fact that not one fraudulent banker is in jail, Obama is a socialist. Too bad the Soviet Union no longer exists or they would be tagging Obama with the communist label. So now they are reduced in effect to accusing him of being sympathetic to the European Union! Gorbachev said that the collapse of the Soviet Union would deprive the US of its enemy. How right he was? The US was deprived of its chief bogeyman when the Soviet Union imploded. And they cannot very well demonize The Communist Party of China, our chief trading partner and financial co-dependent. So they are reduced to accusing Obama of being a European socialist.

The dynamic here is to demonize Obama based on beliefs not facts. And they have a lot of money to do it with. In many media markets there are no countervailing views. People are left to the imprecations of Rush Limbaugh and Fox News. So they hear day in and day out that Obama is A TERRIBLE PRESIDENT, the worst President etc. Knowledgable persons whose voices are hardly consulted might say that Obama's predecessor, George W Bush, was among the worst.

A 2006 Siena College poll of 744 professors reported the following results:

"George W. Bush has just finished five years as President. If today were the last day of his presidency, how would you rank him? The responses were: Great: 2%; Near Great: 5%; Average: 11%; Below Average: 24%; Failure: 58%."

"In your judgment, do you think he has a realistic chance of improving his rating?” Two-thirds (67%) responded no; less than a quarter (23%) responded yes; and 10% chose no opinion or not applicable."

Thomas Kelly, professor emeritus of American studies at Siena College, said: "President Bush would seem to have small hope for high marks from the current generation of practicing historians and political scientists. In this case, current public opinion polls actually seem to cut the President more slack than the experts do." Dr. Douglas Lonnstrom, Siena College professor of statistics and director of the Siena Research Institute, stated: "In our 2002 presidential rating, with a group of experts comparable to this current poll, President Bush ranked 23rd of 42 presidents. That was shortly after 9/11. Clearly, the professors do not think things have gone well for him in the past few years. These are the experts that teach college students today and will write the history of this era tomorrow."

A 2010 Siena poll of 238 Presidential scholars found that former president George W. Bush was ranked 39th out of 43, with poor ratings in handling of the economy, communication, ability to compromise, foreign policy accomplishments and intelligence. Meanwhile, the current president, Barack Obama was ranked 15th out of 43, with high ratings for imagination, communication ability and intelligence and a low rating for background (family, education and experience).

Bush doubled the national debt from $5 trillion to $10 trillion by giving tax cuts to the rich, an unfunded prescription drug benefit to seniors which was a giveaway to the pharmaceutical corporations and two unfunded wars in Iraq and Afghanistan. Obama took out the leadership of Al Quaeda including Osama bin Laden and Anwar al-Awlaki, brought or is bringing those unfortunate wars to an end and is doing his best to restore Clinton's tax structure which would raise taxes on the rich while keeping tax cuts for the middle class and poor. Obama's health care act, popularly known as Obamacare, would, among other things, end the insurance corporations' policy of rescission which denies insurance to people with pre-exisitng conditions, close the doughnut hole for seniors and keep young people on their parents' policies till age 26, an important consideration in an era of high youth unemployment. The fact is that Bush Jr was cavalier in implementing policies that were not only disastrous for the US including the war he lied us into in Iraq, but also ran up the national debt in a huge way. These policies are still in effect because of Republican filibusters that keep them in effect. Only now Obama is being blamed for them by the right wing talking heads, and using their powers of persuasion, they are doing their best to convince the American people that Obama is a spenthrift who only wants bigger government despite the fact that there have been massive job losses in the public sector and modest gains in the private sector.

So the fictitious President Obama is what Santorum, Romney, Gingrich, Limbaugh, Hannity and all the rest are trying to sell to the US public. They are fueled with billions of dollars from right wing billionaires like the Koch brothers and Sheldon Adelson for whom a million or two invested here or there is nothing more than pocket change. With an income of $1 billion a year, which translates to $1000 million a year or $2.7 million a day, these guys can well afford a day's pay to influence elections in their favor. That's pocket change to them. So they associate Obama with Satan. He's supposed to be in league with the devil. They send around emails showing a skunk, half black and half white, and associate that with Obama. There's no depth that they won't sink to to demonize Obama except of course they haven't sunk to the depth of trying to convince us that he's channeling Adolf Hitler. I guess Hitler's considered to be even worse than the devil! And of couse all this is based on statements like "I think that Obama blah blah..." and "I believe that Obama blah blah ...." Nothing based on facts because the facts are quite the opposite of the image they are trying to create

And the truth is that they don't give a rip about all the stuff they try to get the electorate riled up about like the social issues - abortion, birth control, God, gays and guns. These are all smoke screens to hide their real agenda which is tax breaks for the rich, deregulation for corporations and privatization of public schools. Of course they never talk about inequality or the fact that corporations only contribute 8% of Federal revenues instead of the 30% they used to contribute. They don't talk about the fact that the rich pay taxes at a lower rate than the poor. The last thing they want to talk about is the fact that there is $2.5 trillion in the social security trust fund because they want to eliminate social security on the grounds that it is running out of money.

So Obama is terrible, a failure (they love that tag), the worst President in American history based on not facts but beliefs. Except that these intelligent men don't really believe that at all. Just like the lawyer that knows his client is guilty and effectively and skillfully convinces the jury that he really is innocent, right wing talking heads including Republican politicians are trying to draw a picture of Obama as the worst President in American history and then convince you that this belief based reality is the real reality.

February 17, 2012

Part 2 covering the Bush Sr, Clinton, Bush Jr and Obama years can be found here.

We rely for data for this blog on the Federal Individual Income Tax Rates History for income years 1913 to 2011 put out by taxfoundation.org. Also Historical Capital Gains and Taxes put out by the Tax Policy Center of the Urban Institute and the Brookings Institution and the Social Security and Medicare Tax Rates put out by socialsecurity.gov. We will report only on income tax rates for a married couple filing jointly. Tax rates for other classifications of people generally followed the same trajectories. It is a sordid history of how Republican Presidents Reagan and Bush Jr. lowered taxes on the rich, raised taxes on the poor and middle class and drove up the US national debt. Let's start with tax year 1980 the first year Reagan occupied the White House. The tax rates that year were carried over from the Carter Presidency. It took a couple of years for Reagan to get his tax cutting Mojo working. In 1980 the income tax table was the following. All amounts are adjusted for inflation.

The first thing to notice is that there are 16 tax brackets. Over the ensuing years the number of tax brackets would be reduced under the guise of simplification, but really what this reduction amounts to is a "flattening" of the tax code on the way to that conservative Valhalla - the flat tax. The second thing to notice is that the highest tax rate is 70%. That would be reduced in coming years to less than half that amount giving a huge bonus to the rich. The third thing to notice is that the highest marginal tax rate applies to incomes over $586,546. That means that for higher incomes - and incomes well over $1 million were not that uncommon in 1980 - there were no additional tax brackets at higher marginal tax rates. This tendency not to progressively tax the highest incomes is a feature that will be accentuated in the terms of Republican Presidents over the next 30 years. Clinton "unflattened" the tax code adding three new brackets at the high end while keeping taxes on the poor and middle class constant. However, in Clinton's second term under a Republican controlled Congress, the capital gains tax affecting mainly the rich was lowered exemplifying the fact that Congress has much more control over taxes than does the President. Reagan and Bush Jr primarily lowered taxes on the rich while Reagan also raised taxes on the poor as a concomitant.

In 1980 the maximum tax rate on long term capital gains stood at 28%. Also in 1980 the payroll tax (FICA and SECA) stood at 6.13% for employers and employees and at 8.1% for self-employed. FICA is the tax that employers and employees pay for social security and medicare; SECA is the tax the self-employed pay. Reagan and Greenspan would hike these rates spiking the rate for self-employed thus adhering to their philosophy of taxing the poor while lowering taxes on the rich since payroll taxes are a flat tax with no deductions, no exemptions. The poor while paying little if anything in income tax are still stuck with almost exhorbitant payroll taxes especially the self-employed. And when they retire, the poor self-employed get a relative pittance in benefits despite having paid in at the highest rates.

In 1981 the income tax table was not substantially changed keeping the same 16 tax brackets. However, the maximum tax rate on long term capital gains was lowered from 28% to 20%, a big reduction for the rich who have much more income from capital gains than do the middle class and the poor. While lowering taxes on the rich Reagan simultaneously raised them on the poor not through the income tax but by means of FICA and SECA taxes. Those rates increased from 6.13% to 6.65% for employers and employees and from 8.1% to 9.3% for the self-employed.

The first thing to notice here is a reduction in the progressivity of the tax code since 16 brackets have been reduced to 13 eliminating the top three tax brackets altogether! The top tax bracket starts at $199,035, a brazen tax giveaway to the rich! The lowest taxable bracket starts at roughly $7906. rather than $9258 as it did in 1980, a slight increase on the poor. There are also slight increases on the middle class throughout the tax code.

The maximum long term capital gains tax rate remained steady at 20% while FICA and SECA taxes were raised slightly. So we have seen taxes on the rich diminish remarkably in the second year of Reagan's Presidency by means of the capital gains rate and in the third year by means of the income tax table while at the same time taxes on the poor and middle class were raised through the FICA and SECA tax rates. FICA and SECA taxes are regressive since the same rate applies to all incomes up to a certain cap and beyond the cap there is no payroll tax so the rich get off scot free above a certain income level which in 2011 was $106,800. In 1982 there was a flattening of the income tax code brackets and a raising of the already flattened payroll taxes. The lesson to be learned from the early Reagan years is that taxes were lowered primarily on the rich due to the elimination of the upper three income tax brackets and the lowering of the capital gains tax while they were raised on the poor and middle class primarily through the FICA and SECA taxes.

The following table represents the effects of the "Tax Reform Law of 1984."

Consider the top tax bracket. It remains the same as in 1982 at 50%. However, it doesn't start till an income of $350,715 instead of $199,035 in 1982 thus lowering taxes on the rich again. The 0% tax bracket ends at a lower dollar amount thus raising taxes slightly on the poor again. Consider the middle tax rate of 25.0%. It starts at $46,969 and ends at $57,199 in 1982 while it starts at $53,125 in 1984 and ends at $64,571. This represents a slight lowering on the middle class as well.

The capital gains rate remained the same at 20% while FICA and SECA taxes were given a huge jolt. They were raised from 6.7% and 9.35% respectively in 1982 to 7% and 14% respectively in 1984. This represents a huge increase in regressivity and taxes on the poor and middle class for the self-employed.

In 1986 there were no major changes to the income tax code - only adjustments for inflation. Capital gains tax remained constant at 20%. There were increases in FICA and SECA taxes though. Again taxes on the poor and middle class were raised under Reagan's Presidency. They now stood at 7.15% and 14.3% respectively.

Now in 1987 accordning to the Tax Reform Act of 1986, there were major changes to the income tax code. Here are the tables for 1987:

The number of tax brackets has been drastically reduced from 15 to 5 thus flattening the tax code once again and reducing taxes on the rich! The top tax rate applies to incomes over $177,766 whereas that rate in 1984 applied to incomes over approximately $100,000. Taxes on the poor are raised as well since the 0% tax rate is eliminated entirely! However capital gains taxes are raised back to 28% due to the fact that Democrats took control of Congress in 1986. FICA and SECA taxes remain the same as they were in 1986.

In 1988 the income tax code is radically flattened again.

Table 5 - 1988 - Married Filing Jointly

Marginal Tax BracketsTax RatesOverBut Not Over

15.0% $0 $56,42728.0% $56,427

_______________________________________________

This flattening raised income taxes on the poor considerably by dropping the lowest tax bracket altogether. At the same time it lowered taxes on the rich by dropping the upper two tax brackets! Capital gains tax stayed at 28% while FICA and SECA taxes increased considerably from 7.15% and 14.3% respectively to 7.51% and 15.02% respectively. Thus a double whammy in tax increases for the poor was perpetrated while reducing them drastically for the rich.

All in all the Reagan years under the tutelage of Alan Greenspan were a disaster for the poor and middle class and a bonanza for the rich. The income tax was drastically flattened reducing progressivity while FICA and SECA taxes which are regressive because one rate fits all were raised. For most of Reagan's Presidency capital gains tax was kept low at 20%, another tax giveaway to the rich. However, when Democrats regained control of Congress in 1986, the capital gains tax rate was raised back to 28% where it had been when Reagan entered the Presidency and Republicans controlled Congress. There is a pattern here. Republicans use the tax code to benefit the rich and shift the burden of paying for government to the poor and middle class while Democrats lower taxes on the poor and middle class and raise them on the rich. In 1983, on the recommendation of his Social Security Commission— chaired by none other than the man he later made Fed chairman, Alan Greenspan—Reagan called for, and received, Social Security tax increases of $165 billion over seven years. So it was Alan Greenspan, that Ayn Rand inspired "rock star" of economics, who was primarily responsible for raising taxes on the poor during the Reagan era. Although the pretext for this huge increase in social security and medicare taxes was the fact that at some point the social security trust fund would run out of money, the increase in government revenues was just spent in the government's general fund thus effectively using a huge increase in regressive taxation to fund the government not to provide security for retirees. At the present time despite a supposed $2.5 trillion in the social security trust fund, Republicans are again maintaining that social security is broke and needs "fixing," the fix they recommend being to privatize it.

Finally, we note that Reagan tripled the national debt from approximately $1 trillion to $3 trillion. George W Bush doubled it from $5 trillion to $10 trillion. The two biggest tax cutters (on the rich) were also the two biggest adders to the national debt!

February 11, 2012

Mitt Romney's well rehearsed bit - "I'm not concerned about the very poor. We have a safety net there. If it needs repair, I'll fix it. I'm not concerned about the very rich, they're doing just fine. I'm concerned about the very heart of America, the 90 percent, 95 percent of Americans who right now are struggling." Romney managed to offend almost everyone with his comment about the poor when what he was really trying to do was to pander to the middle class. Since the next election is shaping up to be a fight for the middle class on the part of President Obama, Mitt was just trying to take some of the wind out of his sails by saying in effect 'I'm for the middle class too." Instead all he managed to accomplish was to sound like he had a lack of concern for the poor. The right didn't like it, not because they have any regard for the poor, but because Romney was so inept in his pandering to the middle class. The right prides itself on being first rate panderers. They don't want anybody representing them that can't do this well. Romney gets a failing grade for pandering.

Also when it comes to bald faced lying Romney doesn't rate very well either. He actually is too honest to be a "conservative." To be a true conservative you have to come up with the most outrageous lies and say them with a straight face and a lot of passion. Romney fails on this score too. And when it comes to hatemongering, Romney is similarly ineffective. Red meat conservatives need to work the crowd up into a frenzy of hate for that socialist who takes your rights and freedoms away, namely, Obama. Romney actually was acknowledging the legitmacy of the safety net for the poor - "If [the safety net] is broke, I'll fix it." No! What right wing conservatives wanted to hear is "we've got to get these damn people off of welfare and get rid of the nanny state." Fix the safety net! Blarney! Damned if they want to fix the safety net. We've got to get these lazy, good-for-nothing welfare queens used to the fact that with a Republican in the White House they won't be sucking at the government teat any longer. It takes a really inept politician to piss off people on behalf of the poor (most of which probably don't give a damn about the poor either) while pretending at the same time to be in favor of helping them while at the same time pandering ineptly to the middle class.

Mitt you've got problems! You managed to have an income of $21 million last year while not doing a lick of work on which you paid less than 15% in income tax (practically nothing in social security and medicare tax). Bain Capital has been the bane of existence for all the middle class workers it has been instrumental in laying off. How are you going to square that circle? Sure you made a few dollars from making speeches; I think it was somewhere north of $300,000? The middle class that you were ineptly trying to pander to would love to have the income you made just from your speeches; forget the $21 million from investments. As far as the right wing is concerned, this guy is a loser: no passion, too honest, boring, a lousy hate mongerer, inept panderer and a disaster as a bald faced liar. These are all talents that most right wing politicians have honed and polished to a fine art. They are the mother's milk of right wing politicking. No wonder Gingrich and Santorum are licking their chops!

And then there's the foreclosure crisis about which Romney has said, "Don't try to stop the foreclosure process. Let it run its course and hit bottom." Once it hits bottom, then "investors will swoop in" and buy up the foreclosures and the market will return to normal. Sure, just what we need: people forced out of their homes while investors reap a bonanza. Again Romney is being too honest about what he actually believes. He gets a D in being hypocritical, the hallmark of every successful right wing politician. You have to rev up the crowd about Obama's purported socialist tendencies and then lay it on them that he shouldn't be interfering in the free market without mentioning "run its course" and "investors swooping in." What kind of lame comments are those. Romney is clearly out of touch with the mainstream of right wing rhetoric. He is not giving the crowd the red meat they deserve and want to hear.

And he managed to be for Obamacare, which was modeled on Romney's Massachusetts Romneycare, before he was against it. He better hope that his superpacs will come through with zillions of dollars in negative attack ads against Obama to make up for that flip flop. As for the car industry, Romney maintains that Obama should have just let it fail. Again the government was fooling around in the free market. The fact that Obama saved millions of jobs and that now GM has rebouded to being number one in the world again is lost on him. Only the fact that Obama is a socialist for saving the car industry makes any sense. Let's stand on principle here.

All in all Romney is an incompetent politician: a boring technocrat who is an inept panderer, a mediocre bald faced liar, a lukewarm hypocrite and an unsurefooted hate mongerer. The more he tries to be all these things which don't come naturally to him, the worse he looks and in politics looks are everything. You can't be a successful right wing politician without being first class in each of these categories.

February 02, 2012

One of the few things Mitt Romney and Newt Gingrich agree on is that President Obama is turning America into “European-style welfare culture.”

In his standard stump speech Romney charges Obama with creating a nation of dependents. “Over the past three years Barack Obama has been replacing our merit-based society with an entitlement society.”

Gingrich calls Obama “the best food-stamp president in American history.”

What’s their evidence? Both rely on federal budget data showing direct payments to individuals shot up by almost $600 billion, a 32 percent increase, since the start of 2009.

They also point to Census data showing that 49 percent of Americans now live in homes where at least one person is collecting a federal benefit – Social Security, food stamps, unemployment insurance, worker’s compensation, or subsidized housing. That’s up from 44 percent in 2008.

Finally, they trumpet Social Security Administration figures showing that the number of people on Social Security disability jumped 10 percent in Obama’s first two years in office.

They argue our economic problems stem from this sharp rise in “dependency.” Get rid of these benefits and people will work harder.

But they have cause and effect backwards. The reason for the rise in food stamps, unemployment insurance, and other safety-net programs is Americans got clobbered in 2008 with the worst economic catastrophe since the Great Depression. They and their families have needed whatever helping hands they could get.

If anything, America’s safety nets have been too small and shot through with holes. That’s why the number and percentage of Americans in poverty has increased dramatically over the past three years. According to a study by Northeastern University, a third of families with young children are now in poverty.

This is the real scandal. For example, only 40 percent of the unemployed qualify for unemployment benefits because they weren’t working full time or long enough on a single job before they were canned. The unemployment system doesn’t take account of the fact that a large portion of the workforce typically works part time on several jobs, and moves from job to job.

Republicans also object to Obama’s health care law, which covers 30 million more Americans than were covered before. That law still leaves over 20 million without health insurance. They’ll get emergency care when they’re in dire straights — hospitals won’t refuse them — but we all end up paying indirectly.

Regressive Republicans pretend they’re about opportunity. In reality they’re back at what they’ve been doing for years — promoting Social Darwinism.

January 27, 2012

Republicans are worried sick about Newt Gingrich’s ascendance, while Democrats are tickled pink.

Yet no responsible Democrat should be pleased at the prospect that Gingrich could get the GOP nomination. The future of America is too important to accept even a small risk of a Gingrich presidency.

The Republican worry is understandable. “The possibility of Newt Gingrich being our nominee against Barack Obama I think is essentially handling the election over to Obama,” says former Minnesota Governor Tom Pawlenty, a leading GOP conservative. “I think that’s shared by a lot of folks in the Republican party.”

Pawlenty’s views are indeed widely shared in Republican circles. “He’s not a conservative – he’s an opportunist,” says pundit Joe Scarborough, a member of the Republican Class of 1994 who came to Washington under Gingrich’s banner. Gingrich doesn’t “have the temperament, intellectual discipline or ego control to be either a successful nominee or president,”says New York Republican representative Peter King, who hasn’t endorsed any candidate. “Basically, Newt can’t control himself.”

Gingrich is “an embarrassment to the party,” says New Jersey Republican Governor Chris Christie, and “was run out of the speakership” on ethics violations. Republican strategist Mike Murphy says “Newt Cingrich could not carry a swing state in the general election if it was made of feathers.”

“Weird” is the word I hear most from Republicans who have worked with him. Scott Klug, a former Republican House member from Wisconsin, who hasn’t endorsed anyone yet, says “Newt has ten ideas a day – two of them are good, six are weird and two are very weird.”

The Republican establishment also points to polls showing Gingrich’s supporters to be enthusiastic but his detractors even more fired up. In the latest ABC News/ Washington Post poll, 29 percent view Gingrich favorably while 51 percent have an unfavorable view of him. (Obama, by contrast, draws a 53 percent favorable and 43 percent unfavorable.)

Independents, who will be key to the general election, are especially alarmed by Gingrich.

As they should be. It’s not just Newt’s weirdness. It’s also the stunning hypocrisy. His personal life makes a mockery of his moralistic bromides. He condemns Washington insiders but had a forty-year Washington career that ended with ethic violations. He fulminates against finance yet drew fat checks from Freddie Mac. He poses as a populist but has had a $500,000 revolving charge at Tiffany’s.

And it’s the flagrant irresponsibility of many of his propositions – for example, that presidents are not bound by Supreme Court rulings, that the liberal Ninth Circuit court of appeals should be abolished, that capital gains should not be taxed, that the First Amendment guarantees freedom “of” religion but not “from” religion.

It’s also Gingrich’s eagerness to channel the public’s frustrations into resentments against immigrants, blacks, the poor, Muslims, “liberal elites,” the mainstream media, and any other group that’s an easy target of white middle-class and working-class anger.

These are all the hallmarks of a demagogue.

Yet Democratic pundits, political advisers, officials and former officials are salivating over the possibility of a Gingrich candidacy. They agree with key Republicans that Newt would dramatically increase the odds of Obama’s reelection and would also improve the chances of Democrats taking control over the House and retaining control over the Senate.

I warn you. It’s not worth the risk.

Even if the odds that Gingrich as GOP presidential candidate would win the general election are 10 percent, that’s too much of a risk to the nation. No responsible American should accept a 10 percent risk of a President Gingrich.

I’d take a 49 percent odds of a Mitt Romney win – who in my view would make a terrible president – over a 10 percent possibility that Newt Gingrich would become the next president – who would be an unmitigated disaster for America and the world.

January 17, 2012

After refusing for weeks to release his taxes, Mitt Romney now says he’ll do so — by tax day, April 15. But the real news is what Romney has now admitted about his taxes.

It’s not how much Romney earns. Everyone knows he’s comfortably in the top one-tenth of one percent.

It’s how much he pays of it in taxes. Romney says he pays a tax rate of “about 15 percent.”

That’s lower than the tax rate most of America’s middle class face and far lower than the 35 percent top rate after the Bush tax cut. (To put this in perspective, recall that the top income tax rate under Dwight Eisenhower was 91 percent.)

Newt Gingrich immediately pounced on Mitt’s admission as evidence that Newt’s proposed flat 15 percent tax is ideal, and wants to call it the “Romney tax.” Newt’s flat tax is a fraud. It would dramatically lower the taxes of most of the top 1 percenters and increase the taxes of most of the rest of us.

The real smoking gun is how Romney manages to pay only 15 percent on what’s been his money-gusher of compensation from Bain Capital. Romney hasn’t released his tax returns yet, but the most obvious answer is he treats his Bain income as capital gains — subject to the current capital gains rate of only 15 percent.

A loophole in the tax laws allows private-equity managers like Romney to treat their compensation as capital gains. It’s legal but it’s a scandal. Income from employment is employment income, period.

Private-equity managers cling to the technicality that the money they take out of their companies comes from the appreciation of assets they own and sell. That may be true, but it’s still income they get from their jobs. Common sense would dictate it be treated as ordinary income.

Congress has vowed for years to close this loophole. But somehow it persists. Even when Democrats have been in charge, they haven’t been able to close it.

Guess why. The managers and executives of private-equity funds are big donors to Republicans and Democrats alike.

Don’t call it the Romney tax, as Newt wants to do. Call it the Romney tax loophole. And let him explain why he thinks it’s justified.

January 12, 2012

South Carolina Republican Senator Jim DeMint, the darling of the Tea Party wing nuts of the GOP, is urging Republican candidates to listen to Ron Paul. “One of the things that’s hurt the so-called conservative alternative is saying negative things about Ron Paul,” DeMint told conservative radio host Laura Ingraham. “I’d like to see a Republican Party that embraces a lot of the libertarian ideas.”

Why the sudden enthusiasm of Republican leaders for Ron Paul? Credit his surprisingly strong showing in New Hampshire, where 47 percent of primary voters between the ages of 18 and 29 voted for him.

No other Republican candidate has come nearly as close to winning over young voters – and the GOP desperately needs young voters. The median age of registered Republicans is rising faster than the median age of America.

The Republican right thinks Paul’s views on the economy are responsible for this fire among the young. Yesterday evening, on Larry Kudlow’s CNBC program, I squared off with Larry and the Wall Street Journal’s Steve Moore. Both are convinced young people are attracted by Paul’s strict adherence to the views of Austrian economist Ludwig von Mises, and Paul’s desire to move America back to the gold standard.

Baloney. The young are flocking to Ron Paul because he wants to slice military spending, bring our troops home, stop government from spying on American citizens, and legalize pot.

So do I, but I somehow doubt Jim DeMint would advise Republican candidates to listen to me, even if I were a Republican candidate for President.

Paul is attractive to younger voters precisely because of positions he takes that are anathema to the vast majority of the Republican base, including almost all Tea Party Republicans.

If other Republican candidates want to cozy up to him, fine. But if they do, they’ll have a lot of explaining to do in Bluffton, South Carolina.

On the other hand, if Republicans — or Democrats, for that matter — want to win over much of the nation’s young next November, they’d do well to listen carefully to Paul’s positions on national defense and civil liberties.

It’s one thing to criticize Mitt Romney for being a businessman with the wrong values. It’s quite another to accuse him and his former company, Bain Capital, of doing bad things. If what Bain Capital did under Romney was bad for society, the burden shifts to Romney’s critics to propose laws that would prevent Bain and other companies from doing such bad things in the future.

Don’t hold your breath.

Newt Gingrich says Bain under Romney carried out “clever legal ways to loot a company.” Gingrich calls it the “Wall Street model” where “you can basically take out all the money, leaving behind the workers,” and charges that “if someone comes in, takes all the money out of your company and then leaves you bankrupt while they go off with millions, that’s not traditional capitalism.”

Where has Newt been for the last thirty years? Leveraged buyouts became part of traditional capitalism in the 1980s when enterprising financiers began borrowing piles of money, often at high interest rates, to buy up the stock of ongoing companies they believe undervalued. They’d back the loans with the company assets, then typically sell off divisions and slim payrolls, and resell the company to the public at a higher share price – pocketing the gains.

It’s a good deal for the financiers (the $25 billion buyout of RJR-Nabisco in 1988 netted the partners of Kohlberg, Kravis, and Roberts around $70 million each – and most of Mitt Romney’s estimated $200 million fortune comes from the same maneuvers), but not always for the company or its workers.

Some workers lose their jobs when the company downsizes. Others, when the company, now laden with debt, can’t meet its payments to creditors and has to go into bankruptcy. According to the Wall Street Journal, of 77 companies Bain invested in during Romney’s tenure there, 22 percent either filed for bankruptcy or closed their doors by end of eighth year after Bain’s investment.

But, hey, this is American capitalism – at least as it’s been practiced for the past three decades. Is Newt proposing to ban leveraged buyouts? Or limit the amount of debt a company can take on? Or prevent financiers – or even CEOs and management teams – from taking a public company private and then reselling it to the public at a higher price?

None of the above.

Rick Perry criticizes Romney and Bain pushing the quest for profits too far. “There is nothing wrong with being successful and making money,” says Perry. “But getting rich off failure and sticking someone else with the bill is indefensible.”

Yet getting rich off failure and sticking someone else with the bill is what Wall Street financiers try to do every day. It’s called speculation – and at least since the demise of the Glass-Steagall Act, investment bankers have been allowed to gamble with commercial bank deposits, other people’s money.

So is Perry proposing to resurrect Glass-Steagall? Not a chance.

Gingrich, Perry, and others are putting particular focus on the people who lost their jobs as a result of Romney’s Bain Capital. Gingrich’s Super PAC will be running $3.5 million of ads featuring emotional interviews with some of them.

But what, exactly, are Romney’s opponents proposing to do about layoffs that harm so many people? Millions of Americans have lost their jobs over the last four years – and as a result have often lost their health insurance, their homes, and their savings.

Are Gingrich, Perry, and others proposing to expand health insurance coverage for jobless Americans and their families? All I hear from the Republicans is their determination to repeal the law that President Obama championed – which still leaves millions of Americans uninsured. Do Romney’s opponents have plans to keep people in their homes even when they’ve lost their jobs and can’t pay their mortgages? No. Do they propose expanding unemployment insurance? If memory serves, most of them were opposed to the last extension.

I’m all in favor of reforming capitalism, but you’ll permit me some skepticism when it comes to criticisms of Bain Capital coming from Romney’s Republican opponents. None of these Republican candidates has exactly distinguished himself with new ideas for giving Americans more economic security. To the contrary — until the assault on Romney and Bain Capital — every one of them has been a cheerleader for financial capitalism of the most brutal sort.

The party that has repeatedly saved capitalism from its own excesses and thereby preserved capitalism is the Democratic Party. So the only serious question here is what kind of serious reforms Obama will propose when, assuming Romney becomes the Republican nominee, Obama also criticizes Bain Capitalism.

December 20, 2011

Two weeks before the Iowa caucuses, the Republican crackup threatens the future of the Grand Old Party more profoundly than at any time since the GOP’s eclipse in 1932. That’s bad for America.

The crackup isn’t just Romney the smooth versus Gingrich the bomb-thrower.

Not just House Republicans who just scotched the deal to continue payroll tax relief and extended unemployment insurance benefits beyond the end of the year, versus Senate Republicans who voted overwhelmingly for it.

Not just Speaker John Boehner, who keeps making agreements he can’t keep, versus Majority Leader Eric Cantor, who keeps making trouble he can’t control.

And not just venerable Republican senators like Indiana’s Richard Lugar, a giant of foreign policy for more than three decades, versus primary challenger state treasurer Richard Mourdock, who apparently misplaced and then rediscovered $320 million in state tax revenues.

Some describe the underlying conflict as Tea Partiers versus the Republican establishment. But this just begs the question of who the Tea Partiers really are and where they came from.

The underlying conflict lies deep into the nature and structure of the Republican Party. And its roots are very old.

As Michael Lind has noted, today’s Tea Party is less an ideological movement than the latest incarnation of an angry white minority – predominantly Southern, and mainly rural – that has repeatedly attacked American democracy in order to get its way.

It’s no mere coincidence that the states responsible for putting the most Tea Party representatives in the House are all former members of the Confederacy. Of the Tea Party caucus, twelve hail from Texas, seven from Florida, five from Louisiana, and five from Georgia, and three each from South Carolina, Tennessee, and border-state Missouri.

Others are from border states with significant Southern populations and Southern ties. The four Californians in the caucus are from the inland part of the state or Orange County, whose political culture has was shaped by Oklahomans and Southerners who migrated there during the Great Depression.

This isn’t to say all Tea Partiers are white, Southern or rural Republicans – only that these characteristics define the epicenter of Tea Party Land.

And the views separating these Republicans from Republicans elsewhere mirror the split between self-described Tea Partiers and other Republicans.

In a poll of Republicans conducted for CNN last September, nearly six in ten who identified themselves with the Tea Party say global warming isn’t a proven fact; most other Republicans say it is.

Six in ten Tea Partiers say evolution is wrong; other Republicans are split on the issue. Tea Party Republicans are twice as likely as other Republicans to say abortion should be illegal in all circumstances, and half as likely to support gay marriage.

Tea Partiers are more vehement advocates of states’ rights than other Republicans. Six in ten Tea Partiers want to abolish the Department of Education; only one in five other Republicans do. And Tea Party Republicans worry more about the federal deficit than jobs, while other Republicans say reducing unemployment is more important than reducing the deficit.

In other words, the radical right wing of today’s GOP isn’t that much different from the social conservatives who began asserting themselves in the Party during the 1990s, and, before them, the “Willie Horton” conservatives of the 1980s, and, before them, Richard Nixon’s “silent majority.”

Through most of these years, though, the GOP managed to contain these white, mainly rural and mostly Southern, radicals. After all, many of them were still Democrats. The conservative mantle of the GOP remained in the West and Midwest – with the libertarian legacies of Ohio Senator Robert A. Taft and Barry Goldwater, neither of whom was a barn-burner – while the epicenter of the Party remained in New York and the East.

But after the Civil Rights Act of 1964, as the South began its long shift toward the Republican Party and New York and the East became ever more solidly Democratic, it was only a matter of time. The GOP’s dominant coalition of big business, Wall Street, and Midwest and Western libertarians was losing its grip.

The watershed event was Newt Gingrich’s takeover of the House, in 1995. Suddenly, it seemed, the GOP had a personality transplant. The gentlemanly conservatism of House Minority Leader Bob Michel was replaced by the bomb-throwing antics of Gingrich, Dick Armey, and Tom DeLay.

Almost overnight Washington was transformed from a place where legislators tried to find common ground to a war zone. Compromise was replaced by brinkmanship, bargaining by obstructionism, normal legislative maneuvering by threats to close down government – which occurred at the end of 1995.

Before then, when I’d testified on the Hill as Secretary of Labor, I had come in for tough questioning from Republican senators and representatives – which was their job. After January 1995, I was verbally assaulted. “Mr. Secretary, are you a socialist?” I recall one of them asking.

But the first concrete sign that white, Southern radicals might take over the Republican Party came in the vote to impeach Bill Clinton, when two-thirds of senators from the South voted for impeachment. (A majority of the Senate, you may recall, voted to acquit.)

America has had a long history of white Southern radicals who will stop at nothing to get their way – seceding from the Union in 1861, refusing to obey Civil Rights legislation in the 1960s, shutting the government in 1995, and risking the full faith and credit of the United States in 2010.

Newt Gingrich’s recent assertion that public officials aren’t bound to follow the decisions of federal courts derives from the same tradition.

This stop-at-nothing radicalism is dangerous for the GOP because most Americans recoil from it. Gingrich himself became an object of ridicule in the late 1990s, and many Republicans today worry that if he heads the ticket the Party will suffer large losses.

It’s also dangerous for America. We need two political parties solidly grounded in the realities of governing. Our democracy can’t work any other way.

December 18, 2011

Newt Gingrich has done it again. With his new tax plan he has raised the bar from irresponsibility to recklessness.

Every dollar estimate I’m about to share with you comes from the independent, non-partisan Tax Policy Center – a group whose estimates are used by almost everyone in Washington regardless of political persuasion.

First off, Newt’s plan increases the federal budget deficit by about $850 billion – in a single year!

To put this in perspective, most forecasts of the budget deficit cover ten years. The elusive goal of the White House and many on both sides of the aisle in Congress is to reduce that ten-year deficit by 3 to 4 trillion dollars.

Newt goes in the other direction, with gusto. Increasing the deficit by $850 billion in a single year is beyond the wildest imaginings of the least responsible budget mavens within a radius of three thousand miles from Washington.

Imagine what Standard & Poor’s or Moody’s or Fitch would do if it became law. We’d go directly from a triple-A credit rating to triple X – the veritable porn star of fiscal mayhem. Interest on our debt would become larger than most of the rest of the budget.

Most of this explosion of debt in Newt’s plan occurs because he slashes taxes. But not just anyone’s taxes. The lion’s share of Newt’s tax cuts benefit the very, very rich.

That’s because he lowers their marginal income tax rate to 15 percent – down from the current 35 percent, which was Bush’s temporary tax cut; down from 39 percent under Bill Clinton; down from at least 70 percent in the first three decades after World War II. Newt also gets rid of taxes on unearned income – the kind of income that the super-rich thrive on – capital-gains, dividends, and interest.

Under Newt’s plan, each of the roughly 130,000 taxpayers in the top .1 percent – the richest one-tenth of one percent – reaps an average tax cut of $1.9 million per year. Add what they’d otherwise have to pay if the Bush tax cut expired on schedule, and each of them saves $2.3 million a year.

To put it another way, under Newt’s plan, the total tax bill of the top one-tenth of one percent drops from around 38 percent of their income to around 10 percent.

What about low-income households? They get an average tax cut of $63 per year.

Oh, I almost forgot: Newt also slashes corporate taxes.

I’m not making this up.

This might be amusing if Newt were just being old Newt – if this were another infamous hot-air bubble emerging from an always provocative, sometimes clever, often bizarre mind.

But it’s the tax plan of the leading candidate for president of one of the two major political parties of the United States.

And it comes at a time when America’s super rich are raking in a larger portion of total income and wealth than at any time over the last eighty years, and when their marginal taxes are lower than they’ve been in three decades; a time when the nation’s long-term budget deficit is causing cuts in education and infrastructure which will impair our future and that of our children, and when safety nets and social services are being slashed.

Can Newt get away with this?

Probably — because his plan also comes at a time when Americans are so cynical about the major institutions of our society that someone who offers huge, outrageous plans holds a special fascination: The whole system is so awful, people tell themselves, why not just jettison everything and start from scratch? Let’s throw caution to the winds and do something really big – even if it’s colossally stupid.

This is why the more outrageous Newt can be, the better his polls. The more irresponsible his bomb-throwing, the more attractive he becomes to a sizable portion of Americans so fed up they feel like throwing bombs.

History is full of strong men with dangerous ideas who gain power when large masses of people are so desperate and disillusioned they’ll follow anyone who offers big, seemingly easy solutions.

At times like this a nation must depend on its wise elders – people who have gained a reputation for good judgment and integrity, and who are broadly respected by all sides regardless of political affiliation or ideology – to call out the demagogues, speak the truth, and restore common sense.

The great tragedy of America today is the paucity of such individuals when we need them the most.

December 12, 2011

Two important reforms are stopping the revolving door between Washington and the nation’s financial giants, and preventing financiers from flipping companies(making short-term profits by borrowing big sums to buy them, then squeezing payrolls and firing employees, and reselling the stripped-down companies at a profit — unless the debt-laden firms fall into bankruptcy first).

Remarkably, the frontrunners for the Republican nomination for president seem to agree. At least, that’s the clear implication from what they’ve said today.

During a morning appearance on Fox News, Mitt Romney said Newt Gingrich should return the $1.6 million in payments he received from mortgage financial giant Freddy Mac.

Gingrich has tried to defend himself by saying Freddy paid him as a “historian,” but anyone with half a brain knows Freddy wasn’t interested in history. It coughed up the money because they wanted Newt to influence his former House colleagues, so they wouldn’t take steps to reduce Freddy’s financial risk or reach.

In effect, Romney is taking a swipe not only at Gingrich but at the well-oiled revolving door linking financial giants to former congressional leaders, Treasury officials, and their staffs. That revolving door is one of the reasons the Street and its auxiliaries (like Fannie and Freddie) took the risks that caused the financial crisis, and have still never paid the price.

What’s Gingrich’s response? He said this morning ”if Governor Romney would like to give back all the money he’s earned from bankrupting companies and laying off employees over his years at Bain than I would be glad to then listen to him.”

Newt is criticizing not only Romney but also the pump and dump practices of Wall Street that have caused hundreds of thousands of Americans to lose their jobs, put countless companies in jeopardy, and earned a fortune for private-equity managers and others.

If this goes on much longer, the Mitt and Newt Show will get a slot on MSNBC.

November 12, 2011

Polls show Americans angrier and more polarized than at any time since the Vietnam War. That’s not surprising. We have the worst economy since the Great Recession and the worst politics in living memory. The rise of the regressive right over the last three decades has finally spurred a progressive reaction. Occupiers and others have had enough.

Yet paradoxically the presidential race that officially begins a few months from now is likely to be as passionless as they come.

President Obama will be supported by progressives and the Democratic base, but without enthusiasm. His notorious caves to Republicans and Wall Street — failing to put conditions on the Street’s bailout (such as demanding the Street help stranded home owners), or to resurrect Glass-Steagall, or include a public option in health care, or assert his constitutional responsibility to raise the debt limit, or protect Medicare and Social Security, or push for cap-and-trade, or close Guantanamo, or, in general, confront the regressive Republican nay-sayers and do-nothings with toughness rather than begin negotiations by giving them much of what they want — are not the stuff that stirs a passionate following.

Mitt Romney will surely be the Republican presidential candidate — and Romney inspires as little enthusiasm among Republicans as Obama does among Democrats. The GOP will support Romney because, frankly, he’s the only major Republican primary candidate who does not appear to the broader public to be nuts.

But Republicans don’t like Romney. His glib, self-serving, say-whatever-it-takes-to-win-the primaries approach strikes almost everyone as contrived and cynical. Moreover, Romney is the establishment personified — a pump-and-dump takeover financier, for crying out loud — at the very time the GOP (and much of the rest of the country) are becoming more anti-establishment by the day.

At this point neither the Republican right nor the mainstream media wants to admit the yawn-inducing truth that Mitt will be the GOP’s candidate. The right doesn’t want to admit it because it will be seen as a repudiation of the Tea Party. The media doesn’t want to because they’d prefer to sell newspapers and attract eyeballs.

The media are keeping the story of Rick Perry’s cringe-inducing implosion going for the same reason they’re keeping the story of Herman Cain’s equally painful decline going — because the public is forever fascinated by the gruesome sight of dying candidacies. With Bachmann, Perry, and Cain gone or disintegrating, the right wing-nuts of the GOP have only one hope left: Newt Gingrich. His star will rise briefly before he, too, is pilloried for the bizarre things he’s uttered in the past and for his equally bizarre private life. His fall will be equally sudden (although I don’t think Gingrich is capable of embarrassment).

And so we’ll be left with two presidential candidates who don’t inspire — at the very time in American history when Americans crave inspiration.

Instead of a big debate about the basics (how to truly restore jobs and wages, financial capitalism versus product capitalism, the place and role of America in the world, how to rescue our democracy), we’re likely to have a superficial debate over symbols (the budget deficit, the size of government, whether we need a “businessman” at the helm).

This means political passions are likely to move elsewhere — finding their voices in grass-roots movements, social media, demonstrations, boycotts, and meet-ups — on the Main Streets and in the backwaters, and only episodically in the mainstream media or in normal election-year events.

In some ways this may not be such a bad thing. The regressive right has had thirty years to build itself into a political power. Newly-energized progressives (Occupiers and others) need enough time to develop concrete proposals and strategies. What’s the rush? If polls are to be believed, most of the nation is progressive, not regressive (witness last Tuesday’s results in Wisconsin and elsewhere). So it is, after all, only a matter of time.

Yet viewed another way, a passionless presidential race may be dangerous for America. The nation’s problems may not wait. They require bold action, and soon.

October 19, 2011

Republicans are debating again tomorrow night. And once again, Americans will hear the standard regressive litany: government is bad, Medicare and Medicaid should be cut, “Obamacare” is killing the economy, undocumented immigrants are taking our jobs, the military should get more money, taxes should be lowered on corporations and the rich, and regulations should be gutted.

Four years ago the most widely-watched TV debate among Republican aspirants attracted 3.2 million viewers. This year it’s almost twice that number. And for every viewer assume a multiplier effect as he or she shares what’s heard with friends and family.

Americans are listening more intently this time around because they’re hurting and they want answers. But the answers they’re getting from Republican candidates – tripping over themselves trying to appeal to hard-core regressives – are the wrong ones.

The correct ones aren’t being aired.

That’s partly because there’s no primary contest in the Democratic party. So Republicans automatically get loads of free broadcast time to air their regressive nonsense while the Democrats get none.

But even if the President had equal time, the debate about what to do about the crisis would still be frighteningly narrow.

That’s because the President’s answers don’t nearly match up to the magnitude of the crisis.

Without bold alternatives, Americans desperate for big solutions are attracted to bold crackpot ideas like Herman Cain’s “9-9-9” proposal, which would raise taxes on the poor and cut them for the rich.

This is where the inchoate Occupy Wall Street movement could come in. What’s needed isn’t just big ideas. It’s people fulminating for them – making enough of a ruckus that the ideas can’t be ignored. They become part of the debate because the public demands it.

The biggest thing the President has proposed is a plan to create 2 million jobs. But that’s not nearly big enough. Today, 14 million Americans are out of work, and 11 million more are working part-time who’d rather be working full time.

The nation needs a real jobs plan, one of sufficient size and scope to do the job – including a WPA and a Civilian Conservation Corps, to put the millions of long-term unemployed and young unemployed to work rebuilding America.

I’m not criticizing the President. Without energized, mobilized, and organized progressives, even the best people in Washington can’t overcome the monied interests.

For example, America’s long-term debt needs to be addressed, but not the way the President is doing it. He wants to lop $4 trillion off the budget over the next ten years. This almost certainly means sacrificing education, job training, food stamps, and everything else now listed in the so-called “non-defense discretionary” budget, as well as cuts in Medicare and Medicaid.

What about halving the military budget instead? It doubled after 9/11, and military contractors are intent on keeping it in the stratosphere. So is Secretary of Defense Leon Panetta. Result: Defense cuts this size won’t be on the table unless progressives vociferously demand it.

And what about really raising taxes on the rich to finance what the nation should be doing to create a world-class workforce with world-class wages?

Here again, the President’s proposal is paltry compared to what should be done. He wants to raise taxes on the rich by ending the Bush tax cut for incomes over $250,000 and limiting certain deductions.

Yet income and wealth are now more concentrated than they’ve been in 70 years. The top 1 percent gets over 20 percent of total income and holds over 35 percent of national wealth; the richest 400 Americans have more wealth than the bottom 150 million Americans put together.

Meanwhile, effective tax rates on the rich are lower than they’ve been in three decades.

We need to push for higher marginal taxes on the top, and more brackets. Incomes of more than $5 million should be subject to a 70 percent rate. (The top marginal rate was never below 70 percent between 1940 and 1980.) And these rates should apply to all income regardless of source, including capital gains.

This would allow for a bigger Earned Income Tax Credit (that is, a wage subsidy) for lower-income workers. And lower taxes on middle-income workers.

There should be a 2 percent annual surtax on all fortunes over $7 million. This would only hit the richest half a percent of Americans at the very top of the heap. And would yield $70 billion a year – enough to improve our schools and make college affordable to everyone.

And a tax on financial transactions. Even a tiny one of one-half of one percent would generate $200 billion a year. That’s enough to make a major contribution toward early childhood education for every American toddler.

The President’s healthcare law is a good start but it’s not the solution, either. We need Medicare for all. Medicare has lower administrative costs than private insurers. And it has the bargaining heft to reduce drug and hospital costs as well as shift the system from fee-for-services to payments for healthy outcomes.

The President’s financial reforms are also a beginning but they’re way too weak to stop Wall Street depredations. (At this moment, for example, no one even knows the exposure of Wall Street banks to European banks and, through them, Europe’s debt crisis.)

We need to resurrect the Glass-Steagall Act and break up the biggest banks.

The President has talked about fixing Social Security by raising the retirement age. But the best way to ensure the program’s long-term solvency is to lift the ceiling on income subject to Social Security payroll taxes (now $106,800.) Yet this, too, is off the table.

Workers also need more bargaining power. The ratio of corporate profits to wages is now higher than it’s been since before the Great Depression. Workers should be able to form unions through a simple up-or-down vote, without delay.

None of this is possible without strong and consistent pressure from the progressive side. Regressives are setting the agenda.

The President isn’t even talking about the environment any more. Yet climate change is a reality, and our survival depends on reducing carbon emissions.

We should tax carbon-based fuels, and divide the revenues equally among all Americans. It’s the best way to get us to switch to non-carbon fuels, and stimulate research and development of them. And by dividing the revenues, the typical American would come out ahead even though some prices would increase.

Finally, we need public financing of elections and strict limits on so-called “independent” expenditures. Corporations should have to get the approval of every shareholder before spending corporate funds – the shareholders’ money – on politics.

I have no idea whether the Occupiers will morph into the kind of progressive force necessary to put these ideas into play. But if Americans stand together and demand real reform, we can have a real national debate in 2012.

Tomorrow’s Republican debate may attract lots of viewers. It need not capture their minds.

October 01, 2011

President Obama can get on the stump and promise action to create more jobs, tax the rich, defend the middle class, have the government provide more Pell grants, take care of children in poverty, whatever... But he need not say all that because, even if he's reelected, he can provide none of it unless the Democrats have a majority in the House and a filibuster proof majority in the Senate which translates to 60 Senators. If the statistics in Congress don't align, Mr. Obama will accomplish exactly nothing even if he gets four more years. Therefore, the most honest campaign speech he can make is "If you elect a majority of Democrats in the House and 60 Democrats in the Senate, I will give you x number of jobs on Day 1 of my second term. Otherwise, you will get nothing but gridlock for the entirety of my second term because the Republicans in Congress will block everything I propose." All this emphasis on what Mr. Obama can or cannot do is ridiculous if he doesn't have the power to do it, and the only way he will have the power to do anything is if he has a Democratic Congress and a filibuster proof Democratic Senate. Mr. Obama has shown that he is not bold enough to defy convention, and the conventional wisdom is that the executive branch in and of itself can do nothing except fight wars and plead with Congress.

Sure now it seems Obama has gotten over his predilection for appeasing the Republicans in Congress realizing that it's absolutely futile to believe in "compromise" with that bunch of jive turkeys. Today he's talking tough, but he's resigned to doing nothing. Might as well start campaigning now for 2012 because nothing will be getting done by government until after the election a year from now. But nothing will get done even then if Mr. Obama doesn't have an agreeable Congress to go along with him, and, reading the tea leaves, it doesn't seem that Democrats will be elected in large numbers unless Democrats including Mr. Obama start making that clear now. Congress has a low approval rating, 12%, which tells the American people "throw the bums out," the good ones along with the bad. In other words the American people will throw out the baby with the bath water unless they start to discriminate between Republicans and Democrats in Congress and start to realize that the blame for nothing getting done lies with the REPUBLICANS IN CONGRESS and not just with some kind of generic CONGRESS. Americans are simple minded. You have to spell it out for them. The campaign of 2012 is not just for the Presidency as if that were the all important thing. No, it's for the Presidency AND Congress combined, and, if the right balance isn't achieved, that is to say a Democrat in the White House and a Democratic controlled House and Democratic controlled filibuster proof Senate, then the American people might as well say bye-bye to solving the deficit problem by taxing the rich and solving the jobs problem by government direct creation of jobs.

The fact of the matter is that corporations and the wealthy are sitting on $2 trillion in cash. They could hire more workers if they wanted to without any additional tax breaks or loans from Wall Street, but they obviously don't just want to hire workers for the sake of hiring workers. They will only hire workers if it adds to their bottom line. A lot of Democratic oreiented economists like Reich and Krugman are saying they will only hire workers if there is more demand so, therefore, we need to use Keynesian economics to pump money into the economy to create demand. However, why would corporations hire more workers even if there were more demand when instead they could make more capital investment in automated and computerized machines? If they are given economic incentives, they will preferably use the money to invest in robots and other computer driven equipment to increase output like they've been doing for the last 20 years. They have driven up productivity not by hiring more workers but by investing in intelligent machines and laying off workers. There is no reason to believe they will do anything different even if demand suddenly increases. Therefore, Obama's economic advisers are full of you know what. Nothing the government can do in the way of giving incentives to corporations to hire more workers will actually work because it makes more sense to them to invest in capital equipment which can work 24 hours a day and doesn't require expensive health insurance.

So where does that leave the government's role in creating jobs even if, come 2012, there should happen to be elected by some miracle a Democratic President and a Democratoc Congress. As I see it, it only leaves one alternative: direct job creation by the Federal government as was used during the Great Depression when FDR created jobs with the Civilian Conservation Corps and the Work Projects Administration. And money has to be funneled off of the most profitable upper few percent of the population who have obtained the lion's share of the national income over the last 30 years in order to make this possible so that the nation doesn't go even more deeply into debt. Class war, anyone? It comes down to taking from the rich in order to dole out welfare benefits or taking from the rich in order to put the poor and lower middle class to work in CCC and WPA type jobs. Lord knows, there's tons of work both in conservation (think environmental rehabilitation) and infrastructure repair and development so that direct government job creation in those areas would be anything but make work. Jobs in those areas are much needed and vital to the overall economy not to mention the general welfare of the people. And private enterprise will never create those jobs unless it is given contracts to do so by the government which would entail much more money in order to build in large profits to the private sector which are not necessary if government provides the jobs directly. Think about all the money that has been wasted by lavishing it on private contractors in Iraq and Afghanistan.

Obama's economic team including Fed Chairman Bernanke seems to think that the key to getting the economy moving is to make interest rates so low that loans will be easy to get as if the only thing holding the private sector back from expanding and hiring workers is the ease with which they can get a loan. But this is belied by the fact that the corporations don't need loans to expand: THEY ARE ALREADY SITTING ON $2 TRILLION IN CASH. Why do they need to borrow money? Duhhh! How stupid are these people? They are deluded to think that the only way things get done in this economy is to create more debt. Why would I borrow money to do something if I am sitting on all the cash I would ever need to do it and more? Obama made the mistake of taking advice from Larry Summers and Tim Geithner, Wall Street types who think the only way to get the economy moving is to cater to Wall Street and appease the rich by giving them even more favors: deregulation and lower taxes. This top down approach hasn't worked. That should be obvious by now! Instead the rich are richer than ever, more and more money has been funneled to the top 2% and middle class interests have been neglected. People have lost their homes who shouldn't have had to if the government had acted in their interests. Now investors are sueing the big banks because they were screwed. But what about the people who lost their homes to foreclosure? Little if anything is being done in their behalf.

All in all, it's not all about Obama. If he's not elected in 2012 and Republicans run the table, God help us. The US will become a nation of serfs and a small class of economically powerful and dominant aristocrats. The safety net will be eliminated and more and more people will become homeless and die on the streets for lack of health care. Children's growth will be stunted and they will become increasingly ignorant and uneducated. The country will be by, for and of the rich and powerful. Better to have Obama reelected and a Republican Congress which will mean nothing will get done for four more years, but even that is better than sliding back into another Dark Age. The best scenario, however, would be that Democrats control the Presiency and Congress. This would also guarantee that a liberal would be appointed to the Supreme Court when a vacancy occurs which is very likely in the next 5 years and which would tilt the balance there from the conservative oriented majority which now obtains. If such were the case, then America might well be back on the path towards being a sane and progressive nation again instead of the repudiation of Enlightenment values it was founded on which it is now in danger of becoming.

Phony Fear Factor

The good news: After spending a year and a half talking about deficits, deficits, deficits when we should have been talking about jobs, job, jobs we’re finally back to discussing the right issue.

The bad news: Republicans, aided and abetted by many conservative policy intellectuals, are fixated on a view about what’s blocking job creation that fits their prejudices and serves the interests of their wealthy backers, but bears no relationship to reality.

Listen to just about any speech by a Republican presidential hopeful, and you’ll hear assertions that the Obama administration is responsible for weak job growth. How so? The answer, repeated again and again, is that businesses are afraid to expand and create jobs because they fear costly regulations and higher taxes. Nor are politicians the only people saying this. Conservative economists repeat the claim in op-ed articles, and Federal Reserve officials repeat it to justify their opposition to even modest efforts to aid the economy.

The first thing you need to know, then, is that there’s no evidence supporting this claim and a lot of evidence showing that it’s false.

The starting point for many claims that antibusiness policies are hurting the economy is the assertion that the sluggishness of the economy’s recovery from recession is unprecedented. But, as a new paper by Lawrence Mishel of the Economic Policy Institute documents at length, this is just not true. Extended periods of “jobless recovery” after recessions have been the rule for the past two decades. Indeed, private-sector job growth since the 2007-2009 recession has been better than it was after the 2001 recession.

We might add that major financial crises are almost always followed by a period of slow growth, and U.S. experience is more or less what you should have expected given the severity of the 2008 shock.

Still, isn’t there something odd about the fact that businesses are making large profits and sitting on a lot of cash but aren’t spending that cash to expand capacity and employment? No.

After all, why should businesses expand when they’re not using the capacity they already have? The bursting of the housing bubble and the overhang of household debt have left consumer spending depressed and many businesses with more capacity than they need and no reason to add more. Business investment always responds strongly to the state of the economy, and given how weak our economy remains you shouldn’t be surprised if investment remains low. If anything, business spending has been stronger than one might have predicted given slow growth and high unemployment.

But aren’t business people complaining about the burden of taxes and regulations? Yes, but no more than usual. Mr. Mishel points out that the National Federation of Independent Business has been surveying small businesses for almost 40 years, asking them to name their most important problem. Taxes and regulations always rank high on the list, but what stands out now is a surge in the number of businesses citing poor sales — which strongly suggests that lack of demand, not fear of government, is holding business back.

So Republican assertions about what ails the economy are pure fantasy, at odds with all the evidence. Should we be surprised?

At one level, of course not. Politicians who always cater to wealthy business interests say that economic recovery requires catering to wealthy business interests. Who could have imagined it?

Yet it seems to me that there is something different about the current state of economic discussion. Political parties have often coalesced around dubious economic ideas — remember the Laffer curve? — but I can’t think of a time when a party’s economic doctrine has been so completely divorced from reality. And I’m also struck by the extent to which Republican-leaning economists — who have to know better — have been willing to lend their credibility to the party’s official delusions.

Partly, no doubt, this reflects the party’s broader slide into its own insular intellectual universe. Large segments of the G.O.P. reject climate science and even the theory of evolution, so why expect evidence to matter for the party’s economic views?

And it also, of course, reflects the political need of the right to make everything bad in America President Obama’s fault. Never mind the fact that the housing bubble, the debt explosion and the financial crisis took place on the watch of a conservative, free-market-praising president; it’s that Democrat in the White House now who gets the blame.

But good politics can be very bad policy. The truth is that we’re in this mess because we had too little regulation, not too much. And now one of our two major parties is determined to double down on the mistakes that caused the disaster.

Paul Krugman is professor of Economics and International Affairs at Princeton University and a regular columnist for The New York Times. Krugman was the 2008 recipient of the Nobel Prize in Economics. He is the author of numerous books, including The Conscience of A Liberal, and his most recent, The Return of Depression Economics.

September 30, 2011

We dodged another shut-down bullet, but only until November 18. That’s when the next temporary bill to keep the government going runs out. House Republicans want more budget cuts as their price for another stopgap spending bill.

Among other items, Republicans are demanding major cuts in a nutrition program for low-income women and children. The appropriation bill the House passed June 16 would deny benefits to more than 700,000 eligible low-income women and young children next year.

What kind of country are we living in?

More than one in three families with young children is now living in poverty (37 percent, to be exact) according to a recent analysis of Census data by Northeastern University’s Center for Labor Market Studies. That’s the highest percent on record. The Agriculture Department says nearly one in four young children (23.6) lives in a family that had difficulty affording sufficient food at some point last year.

We’re in the worst economy since the Great Depression – with lower-income families and kids bearing the worst of it – and what are Republicans doing? Cutting programs Americans desperately need to get through it.

Medicaid is also under assault. Congressional Republicans want to reduce the federal contribution to Medicaid by $771 billion over next decade and shift more costs to states and low-income Americans.

It gets worse. Most federal programs to help children and lower-income families are in the so-called “non-defense discretionary” category of the federal budget. The congressional super-committee charged with coming up with $1.5 trillion of cuts eight weeks from now will almost certainly take a big whack at this category because it’s the easiest to cut. Unlike entitlements, these programs depend on yearly appropriations.

Even if the super-committee doesn’t agree (or even if they do, and Congress doesn’t approve of their proposal) an automatic trigger will make huge cuts in domestic discretionary spending.

It gets even worse. Drastic cuts are already underway at the state and local levels. Since the fiscal year began in July, states no longer receive about $150 billion in federal stimulus money — money that was used to fill gaps in state budgets over the last two years.

The result is a downward cascade of budget cuts – from the federal government to state governments and then to local governments – that are hurting most Americans but kids and lower-income families in particular.

So far this year, 23 states have reduced education spending. According to a survey of city finance officers released Tuesday by the National League of Cities, half of all American cities face cuts in state aid for education.

As housing values plummet, local property tax receipts are down. That means even less money for schools and local family services. So kids are getting larger class sizes, reduced school hours, shorter school weeks, cuts in pre-Kindergarten programs (Texas has eliminated pre-Kindergarten for 100,000 children), even charges for textbooks and extra-curricular activities.

Meanwhile the size of America’s school-age population keeps growing notwithstanding. Between now and 2015, an additional 2 million kids are expected to show up in our schools.

Local family services are being cut or terminated. Tens of thousands of social workers have been laid off. Cities and counties are reducing or eliminating their contributions to Head Start, which provides early childhood education to the children of low-income parents.

All this would be bad enough if the economy were functioning normally. For these cuts to happen now is morally indefensible.

Yet Republicans won’t consider increasing taxes on the rich to pay for what’s needed – even though the wealthiest members of our society are richer than ever, taking home a bigger slice of total income and wealth than in seventy-five years, and paying the lowest tax rates in three decades.

The President’s modest proposals to raise taxes on the rich – limiting their tax deductions, ending the Bush tax cut for incomes over $250,000, and making sure the rich pay at the same rate as average Americans – don’t come close to paying for what American families need.

Marginal tax rates should be raised at the top, and more tax brackets should be added for incomes over $500,000, over $1,500,000, over $5 million. The capital gains tax should be as high as that on ordinary income.

Wealth over $7.2 million should be subject to a 2 percent surtax. After all, the top one half of 1 percent now owns over 28 percent of the nation’s total wealth. Such a tax on them would yield $70 billion a year. According to an analysis by Yale’s Bruce Ackerman and Anne Alstott, that would generate at least half of $1.5 trillion deficit-reduction target over ten years set for the supercommittee.

Another way to raise money would be through a tiny tax (one-half of one percent) tax on financial transactions. This would generate $200 billion a year, and hardly disturb Wall Street’s casino at all. (The European Commission is about to unveil such a tax there.)

All this can be done, but only if Americans understand what’s really at stake here.

When Republicans recently charged the President with promoting “class warfare,” he answered it was “just math.” But it’s more than math. It’s a matter of morality.

Republicans have posed the deepest moral question of any society: whether we’re all in it together. Their answer is we’re not.

August 06, 2011

John Boehner said Tuesday the Republicans got “90 percent of what we wanted” from the budget deal. So presumably he and his colleagues are willing to take responsibility for some 450 points of today’s mammoth 513-point drop in the Dow Jones Industrial Average.

I’m being a bit facetious – but only a bit. It’s always dangerous to read too much into one day’s move in the stock market.

Yet the stock sell-off – not just today’s, but that of the last days – cannot be easily dismissed. It marks Wall Street’s largest losing streak since 2008.

Republicans repeatedly assured the nation that once the debt-limit deal was done – capping spending, cutting the budget deficit, and getting “90 percent” of what they wanted — the economy would bounce back.

Just the opposite seems to be happening.

Call it the Republican’s double-dip recession.

Wall Street investors aren’t ideologues. They don’t obsess about budget deficits ten years from now, or the size of the government. One day doesn’t make a trend, but a giant sell-off like this is motivated by hard, cold realities.

Here are the two hard, cold realities investors are most worried about:

First, the economy looks like it’s dead in the water. The Commerce Department reports almost no growth in the first half of the year. And job growth is just about at a standstill. Far fewer jobs were generated in May and June than necessary just to keep up with the growth in the potential labor force – meaning the employment picture is actually worsening. Investors fear tomorrow’s (Friday’s) jobs report for July will show more of the same.

Secondly, investors now know the federal government’s hands are tied. The original stimulus is over; the Fed’s “quantitative easing” is over.

This week’s deal over the debt ceiling cinches it. The market is now on its own — without enough rocket power get out of the continuing gravitational pull of the Great Recession.

Now that the deal is done, Obama and the Democrats will have a much harder time passing anything close to the stimulus necessary to breach the gap between what consumers (who are 70 percent of the economy) are willing to spend and what the economy can produce at or near full-employment.

Not incidentally, the Commerce Department’s revised data for what happened to the economy in 2008 and 2009 shows the drop to have been far greater than had been supposed. The economy plunged 8.9 percent in the fourth quarter of 2008 – the steepest quarterly decline in more than half a century. And in 2009 household buying declined almost 2 percent (compared with a previous estimate of 1.2 percent). That’s the biggest contraction in almost sixty years.

This means the original stimulus should have been much larger in order to offset the drop. With cash-starved state and local governments simultaneously scaling back their own spending, the federal stimulus needed to be even bigger.

So much for Republican claims that the original stimulus “didn’t work.” Of course it didn’t, given the size of the slide.

It was never a debt crisis. The debt crisis was manufactured. It’s been a jobs, wages, and growth crisis all along. And that reality has finally caught up with us.

Now that we’re slouching toward a double-dip recession, the only hope is voters will tell their members of Congress – who are now on recess back home – to stop obsessing about future budget deficits and get to work on the real crisis of unemployment, falling wages, and no growth.

We need a bold jobs bill to restart the economy. Eliminate payroll taxes on the first $20,000 of income for two years. Recreate the WPA and the Civilian Conservation Corps. The federal government should lend money to cash-strapped states and local governments. Give employers tax credits for net new jobs. Amend the bankruptcy laws to allow distressed homeowners to declare bankruptcy on their primary residence. Extend unemployment insurance. Provide partial unemployment benefits to people who have lost part-time jobs. Start an infrastructure bank.

And more.

The jobs bill should be number one on the nation’s agenda. It should have been all along.

July 18, 2011

I’ve spent enough of my life in Washington to take its theatrics with as much seriousness as a Seinfeld episode. A large portion of what passes for policy debate isn’t at all — it’s play-acting for various constituencies. The actors know they’re acting, as do their protagonists on the other side who are busily putting on their own plays for their own audiences.

Typically, though, back stage is different. When the costumes and grease paint come off, compromises are made, deals put together, legislation hammered out. Then at show time the players announce the results – spinning them to make it seem they’ve kept to their parts.

At least that’s the standard playbook.

But this time there’s no back stage. The kids in the GOP have trashed it. The GOP’s experienced actors – House Speaker John Boehner and Senate Minority Leader Mitch McDonnell – have been upstaged by juveniles like Eric Cantor and Michele Bachmann, who don’t know the difference between playacting and governing. They’re in league with tea party fanatics who hate government so much they’re willing to destroy the full faith and credit of the United States. Washington has gone from theater to reality TV – a game of hi-jinks chicken that could end in a crash.

So now the GOP’s experienced actors are trying to retake the stage. They’ve set a vote Tuesday for a so-called “cut, cap, and balance” plan – featuring an immediate $100 billion-plus cut from next year’s budget and a constitutional amendment requiring a balanced budget.

The plan would be a disaster for the nation, of course – a cut of that magnitude when the economy is still struggling to get out of recession would plunge it back in, and a balanced-budget amendment would make it impossible to counteract future recessions with extra spending and tax cuts.

But, hey, it’s all for show. The GOP’s adults know the President would veto their cuts and they couldn’t possibly muster the two-thirds of the Senate and House needed to override the veto. Nor, obviously, do they have the two-thirds necessary to pass a constitutional amendment.

The point is to give the kids more votes they can wave in the direction of their tea party constituents. It’s hoped that the “cut, cap, and balance” plan — along with Mitch McConnell’s proposed Republican vote disapproving the President’s move to raise the debt ceiling (which the President will then veto) — will be enough to get the juveniles to raise the debt ceiling before the August 2 deadline.

“The cut, cap and balance plan that the House will vote on next week is a solid plan for moving forward,” John Boehner told reporters Friday. Translated: I hope this will be enough playacting to get their votes on the debt ceiling.

But even if it’s enough, the bigger problem remains: There’s still no back stage where the real work of governing this country can occur. At best, the vote to raise the debt ceiling kicks the can down the road only until the end of 2012. By then, if we don’t elect adults, the kids will be in charge.

July 17, 2011

After a bruising midterm election, the president moves to the political center. He distances himself from his Democratic base. He calls for cuts in Social Security and signs historic legislation ending a major entitlement program. He agrees to balance the budget with major cuts in domestic discretionary spending. He has a showdown with Republicans who threaten to bring government to its knees if their budget demands aren’t met. He wins the showdown, successfully painting them as radicals. He goes on to win re-election.

Barack Obama in 2012? Maybe. But the president who actually did it was Bill Clinton. (The program he ended was Title IV of the Social Security Act, Aid to Families with Dependent Children.)

It’s no accident that President Obama appears to be following the Clinton script. After all, it worked. Despite a 1994 midterm election that delivered Congress to the GOP and was widely seen as a repudiation of his presidency, President Clinton went on to win re-election. And many of Mr. Obama’s top aides—including Chief of Staff Bill Daley, National Economic Council head Gene Sperling and Pentagon chief Leon Panetta—are Clinton veterans who know the 1995-96 story line by heart.

Republicans have obligingly been playing their parts this time. In the fall of 1995, Speaker Newt Gingrich was the firebrand, making budget demands that the public interpreted as causing two government shutdowns—while President Clinton appeared to be the great compromiser. This time it’s House Majority Leader Eric Cantor and his Republican allies who appear unwilling to bend and risk defaulting on the nation’s bills—while President Obama offers to cut Social Security and reduce $3 of spending for every dollar of tax increase.

And with Moody’s threatening to downgrade the nation’s debt if the debt limit isn’t raised soon, Republicans appear all the more radical.

So will Barack Obama pull a Bill Clinton? His real problem is one Mr. Clinton didn’t have to contend with: a continuing terrible economy. The recession in 1991-92 was relatively mild, and by the spring of 1995, the economy was averaging 200,000 new jobs per month. By early 1996, it was roaring—with 434,000 new jobs added in February alone.

I remember suggesting to Mr. Clinton’s then-political adviser, Dick Morris, that the president come up with some new policy ideas for the election. Mr. Morris wasn’t interested. The election will be about the economy—nothing more, nothing less, he said. He knew voters didn’t care much about policy. They cared about jobs.

President Obama isn’t as fortunate. The economy remains hampered by the Great Recession, brought on not by overshooting by the Federal Reserve but by the bursting of a giant housing bubble. As such, the downturn has proven resistant to reversal by low interest rates. The Fed has kept interest rates near zero for more than two years, opened the spigots of its discount window, and undertaken two rounds of quantitative easing—all with little to show for it.

Some in the White House and on Wall Street assume the anemic recovery will turn stronger in the second half of the year, emerging full strength in 2012. They blame the anemia on disruptions in Japanese supply chains, bad weather, high oil prices, European debt crises, and whatever else they can come up with. These factors have contributed, but they’re not the big story.

When the Great Recession wiped out $7.8 trillion of home values, it crushed the nest eggs and eliminated the collateral of America’s middle class. As a result, consumer spending has been decimated. Households have been forced to reduce their debt to 115% of disposable personal income from 130% in 2007, and there’s more to come. Household debt averaged 75% of personal income between 1975 and 2000.

We’re in a vicious cycle in which job and wage losses further reduce Americans’ willingness to spend, which further slows the economy. Job growth has effectively stopped. The fraction of the population now working (58.2%) is near a 25-year low—lower than it was when recession officially ended in June 2009.

Wage growth has stopped as well. Average real hourly earnings for all employees declined by 1.1% between June 2009, when the recovery began, and May 2011. For the first time since World War II, there has been a decline in aggregate wages and salaries over seven quarters of post-recession recovery.

This is not Bill Clinton’s economy. So many jobs have been lost since Mr. Obama was elected that, even if job growth were to match the extraordinary pace of the late 1990s—averaging 300,000 to 350,000 per month—the unemployment rate wouldn’t fall below 6% until 2016. That pace of job growth is unlikely, to say the least. If Republicans manage to cut federal spending significantly between now and Election Day, while state outlays continue to shrink, the certain result is continued high unemployment and anemic growth.

So Mr. Obama’s challenge in 2012 has nothing to do with Mr. Clinton’s in 1996. Most Americans care far more about jobs and wages than they do about budget deficits and debt ceilings. Even if Mr. Obama is seen to win the contest over raising the debt limit and succeeds in painting Republicans as radicals, he risks losing the upcoming election unless he directly addresses the horrendous employment problem.

How can he do this while continuing to appear more reasonable than Republicans on the deficit? By coming up with a bold jobs plan that would increase outlays over the next year or two but would credibly begin a long-term plan to shrink the budget. To the extent the jobs plan spurs growth, the long-term ratio of debt to GDP will improve.

Elements of the plan might include putting more money into peoples’ pockets by exempting the first $20,000 of income from payroll taxes for the next year, recreating a Works Progress Administration and Civilian Conservation Corps to employ the long-term jobless, creating an infrastructure bank to finance improvements to roads and bridges, enacting partial unemployment benefits for those who have been laid off from part-time jobs, and giving employers tax credits for net new hires.

The fight over the debt ceiling will be over very soon. Most Washington hands know it will be raised. Political tacticians know President Obama will likely appear to win the battle, and his apparent move to the center will make Republicans look like radicals. But the Clinton script will take the president only so far. If he wants a second term, he’ll have to come out swinging on jobs.

Books

Doug Ramsey: Take Five: The Public and Private Lives of Paul DesmondThis is a great book! Paul Desmond and Dave Brubeck formed the heart of one of the best all time jazz groups. Paul was the quintessential intellectual, white jazz musician. A talented writer, he never published anything. However author, Doug Ramsey has collected Paul's letters here. How ironic that now his writing in the form of letters to his father and ex-wife, among others, is finally published showing another window on the mind of this talented person.
A sideman, for the most part, his entire life, the Dave Brubeck Quartet might never have happened at all due to the fact that Paul had managed to offend Dave to the point where he never wanted to see him again. It had to do with a gig that Paul actually was the leader of. Paul wanted to take the summer off to play another gig, and Dave wanted Paul to let him take over the gig at the Band Box in Palo Alto, CA. Paul wouldn't let him and Dave, married with two children, proceeded to starve.
Due to an elaborate publicity campaign, when he realized the error of his ways, Paul managed to worm himself back into Dave's good graces. The rest is history.
This book is remarkable for the insight it gives into a working jazz musician's mind, wonderful pictures and interviews with the significant figures in Paul's life. Author Ramsey, not a remarkable penman himself, has nevertheless done a magnificent job of assembling all these various materials. Unlike a lot of jazz authors, he doesn't overly idolize his subject with the result that you get the feeling that you have met a real person and not a idealized version. That's high praise indeed for any biographer. (*****)